» 


I 


THE  SCIENCE 
OF  PURCHASING 


Mstrltmting 
Copies  of 

to  Receiving 


ORGANIZATION   CHART  FOB  PURCHASING  DEPARTMENT 


THE  SCIENCE 
OF    PURCHASING 


BY 

HELEN  HYSELL 


WITH  AN  INTRODUCTION  BY 
J.  GEORGE  FREDERICK 

PRESIDENT  OF  THE  BUSINESS  BOURSE,  N.  Y.       AUTHOR  OF    "MODERN 
SALES   MANAGEMENT,"   "BUSINESS   RESEARCH    AND  STATIS- 

ETC. 


D.   APPLETON   AND   COMPANY 
NEW  YORK  :  :  1922  :  :  LONDON 


COPYRIGHT,   1922,  BY 

D.  APPLETON  AND  COMPANY 


FMKTZD  IN  THX  UNITED  STATM  Or  AMXMCA 


INTRODUCTION 

Hundreds  of  books  are  extant  on  selling  and 
salesmanship,  telling  how  a  buyer  may  be  won,  but 
there  were,  until  this  book  was  completed,  only  two 
books  on  buying,  which  is  the  other  side  of  the  story 
of  the  sale.  In  fact,  writers  have  complained  thatj 
so  much  high  class  effort  has  been  given  to  the  wiles 
of  persuading  people  to  buy  that  the  buyers  "have 
no  chance"  against  the  expert  technique  of  salesmen 
and  sales  managers. 

This  book  is  the  first  recognition  of  the  fact  that 
the  science  of  purchasing  has  also  been  keeping  pace 
with  the  science  of  selling.  The  modern  purchasing 
agent  is  a  more  important  man  by  far  than  he  was 
in  older  days  when  purchasing  agents  were  likely  to 
be  more  of  the  nature  of  "rubber  stamps,"  or 
"buffers,"  or  were  bargainers  for  an  extra  penny 
of  advantage.  A  purchasing  agent  of  the  modern 
breed  is  a  creative  thinker  and  planner  and  a.  stu- 
dent of  many  elements  of  business.  Very  justifi- 
ably he  now  regards  his  work  as  a  profession,  be- 
cause he  now  applies  professional  standards  and 
methods  to  his  task.  The  ethics  of  purchasing  is 
now  on  a  most  commendably  high  plane  in  all  but  a 
very  few  fields,  and  the  fact  that  purchasing  agents 
are  leading  in  a  fight  against  commercial  bribery  is 


482340 


vi  INTRODUCTION 

in  itself  an  augury  of  the  new  level  of  pride  and  ef- 
ficience  and  group  consciousness  which  exists. 

For  years  the  seller  of  goods  suffered  more  than 
any  other  class  from  the  backwardness  of  the  pur- 
chasing agent.  He  was  often  an  obstruction  to  his 
firm's  progress,  and  not  as  now  a  channel  and  live 
contact  point  for  securing  for  his  firm  the  best  and 
latest  merchandise.  The  coming  of  more  science  in 
selling  has  been  a  boon  to  the  seller,  because  he  can 
get  a  hearing  for  his  facts.  The  seller  and  the 
buyer  can  meet  on  the  common  platform  of  service 
as  never  before,  and  the  competition  of  the  inferior 
article  is  not  now  so  formidable  as  it  was  when 
sheer  personality  and  polite  graft  muddied  the 
waters.  The  keener,  more  highly  trained  point  of 
view  in  buying  means,  it  is  true,  a  higher  type  of 
salesmanship  and  a  challenge  to  service  and  sound 
merchandising,  but  it  is  welcomed  nevertheless. 

Miss  Hysell  has  written  a  book  which  in  my  opin- 
ion splendidly  and  practically  reflects  the  new  de- 
velopments in  purchasing.  Her  volume  is  complete 
in  all  aspects  and  has  the  right  perspective — be- 
sides being  a  concrete  manual  for  business  houses 
and  students  of  purchasing.  It  will,  I  predict,  bo- 
come  the  standard  volume  on  the  subject,  and 
greatly  increase  the  practice  of  modern  purchasing 
principles — much  to  the  benefit  of  business  as  a 
whole. 

J.  G-EOBGB  FREDEBICK 


CONTENTS 

CHAPTER         ^-— '  PAGE 

./I.    (?EBSONAL  QUALITIES  NECESSARY  FOR  SUCCESS- 
FUL PURCHASE  MANAGEMENT  .     .     .     .       1 
Purchasing  as  a  Vital  Element  in  Business 
— The  Personal  Qualities  Essential  in  Pur- 
chasing     Managers — Natural     Aptitude — 
Foresight — Mental     Alertness — Power     of 
Analysis — Self-reliance — Commonsense — Di-       4 
rect  Action. 

II.    KNOWLEDGE  OF  AIM,  PLANS  AND  RESOURCES  .     13 
Intensive       Knowledge-— Aims — Plans — Fi- 
nancial     Resources — Difference      between 
Credit  and  Resources. 

III.  SOURCE  OF  SUPPLY 19 

The  Necessity  for  a  Coterie  of  Selling 
Firms — Difference  between  Reliable  and 
Dependable  Sources  of  Supply — How  to 
Locate  the  Source  of  Supply — Standing  of 
the  Probable  Source  of  Supply — Policies 
and  Principles  of  the  Seller — Need  for 
A  Purchasing  Agent's  Association. 

IV.  (PRINCIPLES  AND  POLICIES 

—Vital  Need  of  Definite  Organization  Poli- 
cies— Difference  between  Policy  and  Prin- 
ciple— Bearing  of  Sales  Policies  upon  Pur- 
chasing— Purchasing  Executive's  Policy  to- 
ward his  Organization — Importance  of 
Goodwill. 

V.    ATTITUDE  TOWARD  SALES  SOLICITATION    .     .  ,  36 
Importance  of  Right  Relationship  between 
Buyer  and  Seller— Old  Method  of  Selling 
and  Buying — New  Method  of  Selling  and 
vii 


viii  CONTENTS 

CHAPTZK  PA01 

Buying — Reasons  for  Former  Ill-will  be- 
tween Seller  and  Buyer — Gradual  Change 
in  Attitude — Sizing  up  the  Purchasing  Ex- 
ecutive— Personal  Analysis  of  Physical  Ap- 
pearances— Personal  Analysis  of  Speech — 
Personal  Analysis  of  Actions — Personal  An- 
alysis of  Surroundings — The  Purchasing 
Executive's  Analysis  of  the  Salesman — The 
Hand-Clasp — Manner  of  Approach — Ideal 
Salesman  from  the  Salesmanager 's  Point  of 
View — Building  up  a  Sales-Defense — De- 
sirable Impression  to  Leave  with  the  De- 
parting Salesman — Should  There  be  Speci- 
fied Calling  Hours?— The  Salesman's  Side 
of  Calling  Hours — The  Compromise. 

VI.    SERVICE 62 

Service  a  Moot  Question — What  the  U.  S. 
Patent  Officials  rule — Service  According  to 
the  U.  S.  Bureau  of  Standards — Service  as 
It  Appears  to  the  Modern  Salesman — The 
Purchasing  Executive's  Idea  of  Service — 
What  the  Purchasing  Executive  Expects 
When  He  Buys  Service. 

VII.    COOPERATION  AND  COORDINATION  BETWEEN  EX- 
ECUTIVES     70 

Reasons  for  Demanding  Coordination  of 
Departments — Responsibility  of  Purchasing 
toward  Other  Departments — Interdepen- 
dence of  Purchasing  upon  Other  Depart- 
ments— Detailed  Information  that  Must 
Come  to  the  Purchasing  Executive — Co- 
ordination between  Engineering  and  Pur- 
chasing Departments — Relation  between 
Manufacturing  and  Purchasing  Depart- 
ments— Interrelation  of  Sales  to  Purchas- 
ing Department — Interrelation  between 
Accounting  and  Purchasing  Departments — 
Relation  of  Purchasing  to  Economy  of 
Manufacture. 


•g 

CONTEF;  rs  ix 

CHAPTER  PACK 

VIII.  TECHNICAL  KNOWLEDGE  OP  REQUIREMENTS  .  84 
Vital  Necessity  far  detailed  Knowledge — 
Proposed  Use  of  the  Purchase — Manufac- 
turing Processes  of  Materials  Purchased — 
Manufacturing  Processes  in  Relation  to 
Time  Element — Knowledge  of  Price — 
Knowledge  of  Values — Price  Versus  Per- 
formance—Data Necessary  for  Successful 
Purchasing — Guarding  against  Unnecessary 
Purchasing — Quantity  Purchases — Quan- 
tity Purchase  under  Blanket  Order. 

IX.    THE  STUDY  OP  FUTURE  TRENDS  AND  FORE- 
CASTS    99 

The  Proven  Need  of  Forecast  Study  in 
Purchasing — Effects  of  Deflation  on  Pur- 
chasing— Business  Cycles  and  Planning 
Ahead — Changes  in  Quantity  or  Kind  of 
Goods  to  be  Bought — Effect  of  Foreign 
and  Speculative  Buyers — The  Purchasing 
Agent 's  Forecast — Fundamental  Factors  on 
Business  Forecast — Composite  Monthly  and 
Yearly  Changes. 

X.    LEGAL  SIDE  OP  CONTRACTS 118 

Need  for  a  Knowledge  of  Contract  Laws — 
First  Requirement  of  the  Purchasing  Ex- 
ecutive— Law  of  Contracts — The  Consider- 
ation— Meeting  of  Minds — Communication 
of  Acceptance — Competence — Validity  of 
Oral  Contracts — Failure  to  Perform  Agree- 
ment — Misrepresentation « — Cancellation — 
Damages. 

XI.  ETHICAL  SIDE  OP  PURCHASING  .....  133 
Function  of  Ethics  in  Business — Usefulness 
of  Ethical  Standards  in  Business— Pur- 
chasing Ethics  and  Purchasing  Policies — 
Need  for  Laws  to  Enforce  Ethical  Methods 
— Past  Practices  against  the  Purchasing 
Executive — Effect  of  Specialized  Buyers 
upon  Sales  Methods — Competition  Versus 


x  CONTENTS 

CHAPTXB  PAOB 

Corruption — Agitation  and  Laws  against 
Bribery — Moral  and  Material  Aspects  of 
Bribery — Commercial  Bribery  Defined — 
Christinas  Gifts — Purchasing  Executive's 
Duty  to  His  Profession. 

XII.    ORGANIZATION  OF  THE  PURCHASING  DEPART- 
MENT    149 

Correct  Conception  of  Purchasing  Organi- 
zation— Purpose  of  System — Reasons  for 
Different  Kinds  of  Purchasing  Organiza- 
tions— Different  Methods  of  Buying  that 
Require  Different  Types  of  Organizations 
— Analysis  of  Purchasing  Organization — 
Value  of  a  Definite  Principle  behind  an  Or- 
ganization— Value  of  Charts  for  Fixating 
of  Responsibilities — Charting  the  Purchas- 
ing Organization — Matters  for  the  Personal 
Attention  of  the  Purchasing  Executive — 
The  Duties  of  the  Assistant — Duties  of  the 
Chief  Clerk. 

XIII.  STORES 

Vital  Necessity  of  Properly  Controlling 
Materials  and  Supplies — Denning  the  Stores 
Department — Selecting  the  Best  Method  of 
Managing  Materials — Supervision  of  Stores 
— Result  of  Faulty  Stores  System — Per- 
sonal Qualifications  of  the  Storekeeper — 
Duties  of  Storekeeper — Receiving — Sources 
Indirect  Loss — Elimination  of  Indirect 
Losses. 

XIV.  INVENTORY 176 

Importance  of  Inventory — Essentials  of 
Plant  and  Material  Inventory — Perpetual 
and  Physical — Purpose  of  Perpetual  Inven- 
tory— Stock  Levels — Purchasing  Execu- 
tive's Relation  to  Inventory — Stores  De- 
partments' Relation  to  Inventory — Store- 
keeper as  an  Aid  to  Physical  Count. 


CONTENTS 

CUUPTXB 
XV,      STANDARDIZATION 186 

Why  the  Purchasing  Executive  Is  Con- 
cerned with  Standardization — Vital  Neces- 
sity for  Standardization — Beginning  Stand- 
ardization with  Catalogues  and  Forms — 
Standard  Invoices — Purchasing  Executive 
as  a  Balance  to  the  Engineer — Do  Stand- 
ards Interfere  with  Progress? — Effect  of 
Standardization  upon  Kequisitors — Effect 
of  Standardization  upon  the  Seller — Misuse 
of  the  Word  " Standardization"  in  Price- 
Baiting — Effect  of  Standardization  upon 
Storekeeping — The  War  as  a  Stimulation 
to  Standardization. 

XVI.    RECORDS  AND  FORMS 200 

Qualifications  of  an  Ideal  Purchasing  Sys- 
tem— Origin  of  the  Following  Forms  and 
the  Discussion  Thereof — The  Requisition — 
Purchases  Made  without  Requisition — Fil- 
ing of  Requisitions — Quotations — The  Pur- 
chase Order — Acknowledgment — The  Fol- 
low-up System — The  Record  Cards — Filing 
the  Record  Card — Receiving  Record — 
Checking  Invoices — Shortage — Goods  Re- 
turned for  Credit — Delivery  of  Patterns  to 
a  Foundry — Relation  of  Cost  Department 
to  Purchasing  Department. 

APPENDIX.    Notes    on    the    Testing    of    Ma- 
terials            .     .  233 

Index  .  253 


THE  SCIENCE  OF  PURCHASING 


CHAPTER  I 

PERSONAL  QUALIFICATIONS  FOE  SUCCESSFUL 
PURCHASE  MANAGEMENT 

Purchasing  as  a  Vital  Element  in  Business  Suc- 
cess.— The  purchasing  executive  makes  a  most  im- 
portant contribution  to  the  success  of  modern  busi- 
ness. (_  A  dollar  saved  in  wise  and  careful  buying 
is  considered  of  more  value  than  a  dollar  profit,  be- 
cause it  is  a  dollar  earned  over  and  over  again. 
The  entire  structure  of  cost  and  profit  percentage 
rests  upon  a  foundation  of  right  purchase  and  often 
competitive  advantage  and  superiority  in  quality 
is  based  upon  purchasing  policy  and  purchasing 
alertness.  Bankruptcy,  failure  to  earn  or  pay  divi- 
dends, may  be,  and  frequently  is,  chargeable  either 
to  incomplete  or  inadequate  understanding  of  the 
function  of  purchasing. 

In  past  years  it  was  the  practice  to  take  too  nar- 
row a  view  of  purchasing.  The  purchasing  agent 
or  manager  was  popularly  supposed  to  be  an  indi- 
vidual who  warded  off  salesmen  and  played  one 
seller  against  another  in  order  to  get  a  low  price. 
Unfortunately,  there  was  a  large  measure  of  truth  in 
this  assumption.  A  few  years  ago,  the  purchasing 
executive  was  without  vision  or  broad  training  and 

1 


2          THE  SCIENCE  OF  PURCHASING 

usually  without  authority.  In  consequence,  it  be- 
came a  byword  that  purchasing  executives  were 
merely  "figure-heads'* — the  real  purchasing  au- 
thority being  vested  in  others.  Sellers,  as  a  result, 
went  higher  up  whenever  possible. 

This  understanding  of  the  function  of  purchasing 
held  within  the  organization  even  more  than  with- 
out. The  purchasing  executive  was  looked  upon  as 
an  order  writer  and,  as  such,  was  ignored  by  the 
heads  of  other  departments.  Executive  confer- 
ences almost  never  included  him,  and  important 
matters  pertaining  to  expansion  and  curtailment  of 
business  activities  were  decided  upon  without  con- 
sulting the  purchasing  executive.  Yet,  as  an  order 
writer,  he  was  expected  to  purchase  materials  and 
supplies  in  quality  and  quantity  desired,  under  ad- 
vantageous conditions,  and  have  them  on  hand  at 
the  time  specified.  Frequently,  his  only  warning 
was  the  receipt  of  a  requisition  from  the  manufac- 
turing or  stores  division,  in  case  of  increased  pro- 
duction; or  a  cancellation,  in  case  of  curtailment. 

Such  a  situation  was  anomalous  and  unsound  and 
is  being  rapidly  changed.  The  modern  business 
ganization  demands  a  thorough  coordination 
executive  functions.  The  aims,  plans  and  policies 
of  the  entire  organization  are  discussed  and  de- 
cided upon  through  the  cooperative  efforts  of  all 
executives.  A  broad  selling  campaign  is  not  in- 
augurated until  the  salesmanager,  the  advertising 
manager,  the  head  of  the  manufacturing  or  produc- 
tion department,  the  head  accountant  and  th«  pur- 


PERSONAL  QUALIFICATIONS  3 

chasing  executive  have  considered  the  project  from 
all  its  angles  and  have  made  sure  that  each  step  is 
clearly  outlined,  practical  and  within  the  possibili- 
ties. 

Thus,  the  accounting  department  is  cognizant  of 
the  coming  of  an  unusual  expenditure;  the  manu- 
facturing department  is  enabled  to  prepare  for  an 
increase  in  production;  the  advertising  and  selling 
departments  may  perfect  the  details  of  their  cam- 
paign, and  the  purchasing  executive  may  secure 
bids  on  primary  materials  in  advance  of  actual 
need.  Only  by  this  method  can  satisfactory  re- 
sults be  obtained.  Far  from  being  a  mere  clerk 
who  buys  when  some  one  tells  him  to,  or  a  trained 
person  who  heads  an  expert  bureau  that  advises  ex- 
ecutives after  they  have  decided  to  buy,  the  modern 
purchaser  is  a  coordinate  executive  who  has  the 
power  of  direct  action  in  consonance  with  the  ac- 
tions of  other  executives  who  meet  in  conference. 

The  mature  technic  of  purchasing  management  is, 
therefore,  now  developing  and  the  special  require- 
ments of  a  purchasing  executive  are  becoming  def- 
initely known  in  a  way  similar  to  the  knowledge  of 
a  sales  or  advertising  manager. 

The  Personal  Qualities  Essential  in  Purchasing 
Managers. — In  view  of  the  special  demands  made 
upon  a  purchasing  manager  and  the  selling  pressure 
brought  to  bear  upon  him,  a  certain  definite  set  of 
personal  qualities  seems  to  be  required.  He  must 
have  the  correct  temperament  for  his  job  of  buying, 
just  as  distinctly  as  the  salesmanager  must  have  the 


4          THE  SCIENCE  OP  PURCHASING 

correct  temperament  for  selling.  Popularly,  the 
seller  is  presumed  to  require  an  "optimistic"  tem- 
perament, while  the  buyer  is  presumed  to  require 
a  "pessimistic"  temperament.  This  is  not  pre- 
cisely the  case,  but  has,  of  course,  its  elements  of 
truth.  Broadly  speaking,  a  purchasing  manager 
may  be  said  to  require  the  following  principal  per- 
sonal elements : 

1.  Natural  aptitude. 

2.  Foresight. 

3.  Mental  alertness. 

4.  Power  of  analysis. 

5.  Self-reliance. 

6.  Common  sense. 

7.  Direct  action. 

These  qualities  are  separately  discussed  in  the  fol- 
lowing paragraphs. 

Natural  Aptitude. — As  in  other  professions  re- 
quiring natural  aptitude,  together  with  specialized 
training,  so  in  purchasing,  some  men  are  naturally 
better  equipped  than  others  to  make  a  profession  of 
studying  buying  needs  and  doing  the  buying.  It 
is  probably  true  that  some  temperaments  are  "nat- 
ural born"  buying  temperaments  and  others  "nat- 
ural born"  selling  temperaments.  As  the  boy  who 
shows  a  distinct  preference  for  things  mechanical, 
may,  if  he  follows  the  urge  from  within,  become  a 
specialist  in  some  one  of  the  engineering  profes- 
sions; so  possibly,  will  the  child  who,  without  in- 
struction or  previous  experience,  manages  to  drive 
a  good  bargain  when  trading  a  handful  of  marbles 


PERSONAL  QUALIFICATIONS  5 

for  a  jackknife,  become  a  successful  purchase  man- 
ager, providing  his  natural  ability  to  size  up  values 
is  developed. 

All  other  things  being  equal,  it  is  safe  to  say 
that  the  ability  to  become  a  successful  purchasing 
executive  is  primarily  instinctive.  But,  without  ac- 
quired knowledge,  this  instinct  is  likely  to  prove  a 
hindrance  rather  than  a  help.  Buyers  holding  the 
most  responsible  positions  in  the  world  of  business 
to-day  are  those  men  who  get  results  through  the 
broad  and  comprehensive  knowledge  acquired 
through  study — knowledge  that  has  become  so 
deeply  rooted  that  the  man  who  has  made  an  especi- 
ally "good  buy,"  when  asked  how  he  happened  to 
do  it,  may  truthfully  say,  "I  had  a  hunch. "  But 
this  same  "hunch,"  if  analyzed,  would  be  found  to 
have  been  based  upon  an  economic  fact  absorbed  and 
become  a  part  of  the  very  mind  of  the  man. 

Buying  instinct,  therefore,  resolves  itself  into  the 
inherent  propensity  for  bargaining  plus  a  broad  and 
comprehensive  knowledge  'of  markets,  materials, 
methods  and  men.  The  purchase  executive  must  be 
a  trader  by  instinct,  knowing  selling  methods  thor- 
oughly; but  from  the  obverse  side,  his  instinct  must 
keep  him  aware  of  all  the  finesse  of  selling  as  well 
the  finesse  of  buying. 

Foresight. — A  successful  purchasing  executive 
must  be  able  to  foresee  conditions  that,  very  often, 
do  not  appear  at  the  time  of  placing  his  order.  He 
must  take  action  in  reference  to  the  future,  these 
actions  being  based  upon  certain  conditions  that 


6          THE  SCIENCE  OF  PURCHASING 

have  held  in  the  past.  With  many  concerns  the  pur- 
chase budget  is  prepared  months  in  advance  of  the 
date  of  requirement,  in  which  case  the  purchase 
manager  must  take  past  price  variations  as  a  prem- 
ise and,  by  ascertaining  the  basic  principles  under- 
lying these  variations,  anticipate  the  market  trend 
between  the  time  the  order  is  placed  and  the  date 
of  delivery  or  resale.  In  order  to  do  this  success- 
fully he  must  possess  the  power  of  foreseeing,  aug- 
mented by  perpetual  study  of  business  conditions 
past  and  present,  specialized  knowledge  of  the  com- 
modities in  which  he  is  dealing  and  complete  records 
of  requirements  of  the  concern  for  which  he  is  mak- 
ing the  purchase. 

The  buyer's  system  of  stock  keeping  will  enable 
him  to  anticipate  the  needs  of  his  organization  and 
to  gain  absolute  information  concerning  the  maxi- 
mum and  minimum  amount  of  each  material  on 
hand.  Possessing  foresight,  he  will  be  able  to  load 
up  his  firm,  even  beyond  the  maximum  point  or, 
when  it  seems  advisable,  to  buy  in  small  quantities 
from  week  to  week,  knowing  that  a  change  in  the 
market  is  imminent.  He  must  be  able  to  understand 
the  difference  between  foresight  buying  and  sheer 
speculation,  and  how  to  relate  the  company's  finan- 
cial position  to  the  purchasing  plan. 

Mental  Alertness. — In  a  peculiar  degree  a  pur- 
chasing executive  must  be  alert.  A  great  number 
of  highly  trained  sales  and  advertising  forces  are 
pointed  toward  him  and  their  success  is  measured 
by  what  effect  they  can  produce  upon  him  or  what 


PERSONAL  QUALIFICATIONS  7 

decisions  they  can  inveigle  him  into  making.  The 
whole  gamut  of  persuasion,  argument,  personality, 
sophistry,  allurement  and  manipulation  are  operated 
upon  him  by  those  whose  lives  are  given  to  the  per- 
fecting of  these  arts  and  who  probably  receive 
higher  salaries  than  the  purchasing  executive  as  a 
reward  for  their  skill.  The  one  shield  with  which 
the  purchasing  executive  has  to  meet  such  pressure 
is  alertness,  which  means  simply  that  he  clearly  un- 
derstands every  situation  arising  or  representation 
made.  This  need  is  increased  through  the  necessity 
of  carefully  watching  the  multiplex  features  of  the 
market,  anticipating  a  rise  or  fall  in  the  price  of  com- 
modities, and  watching  the  general  economic  drift. 
To  foresee,  however,  for  instance,  the  result  of 
progress  on  the  part  of  a  competitor  or  of  a  selling 
concern;  to  realize  the  effect  of  deterioration  either 
in/the  selling  concern  or  in  the  commodity  in  which 
ip  deals,  requires  alert  attention  to  the  smallest  in- 
dication. To  be  prepared  to  take  advantage  of  prof- 
itable changes  in  the  markets,  the  purchasing  ex- 
ecutive must  be  a  student  of  world  economics  as  well 
as  of  history  of  business  conditions.  He  must  be 
ever  on  the  alert  for  means  whereby  he  may  ne- 
gotiate a  saving  for  his  concern  by  purchasing  ex- 
actly the  right  quantity  at  precisely  the  right  time  in 
order  to  secure  the  best  possible  price.  A  slug- 
gish mind,  a  slow-perceptive  intelligence,  and  af ter- 
witted  temperament,  or  a  dulled  edge  of  awareness 
to  what  is  going  on  is  a  severe  drag  upon  success  in 
purchasing. 


8          THE  SCIENCE  OF  PURCHASING 

Power  of  Analysis. — Considering  the  fact  that  the 
purchase  manager  must  be  a  specialist  along  lines 
highly  diversified  in  nature,  the  ability  to  resolve 
people  and  things  into  their  component  parts,  to 
go  beneath  the  surface  and  discover  the  underlying 
reasons  for  each  point  that  is  brought  to  his  atten- 
tion, is  essential.  This  power  of  analysis  enables 
the  purchaser  to  discover,  without  being  told,  many 
facts  that  would  otherwise  remain  obscure  to  him 
and  would  tend  to  lessen  his  value  to  his  organiza- 
tion. 

By  studying  and  analyzing  the  market  the  wide- 
awake buyer  may  learn  the  precise  reasons  for  the 
rise  and  fall  in  prices.  By  studying  and  analyzing 
the  salesman  with  whom  he  comes  in  contact  he  may 
determine  to  how  great  an  extent  each  one  is  draw- 
ing upon  his  imagination  for  the  supposed  facts  he 
is  stating.  And  by  studying  and  analyzing  the  mem- 
bers of  his  own  organization  he  may  arrive  at  the 
basic  characteristics  of  these  men  and  thus  uncover 
the  different  types  and  learn  how  best  to  handle 
them  tactfully,  and  go  contrary,  sometimes,  to  their 
purchase  recommendations  in  the  interest  of  the 
firm.  Thus,  when  he  is  confronted  with  a  requisi- 
tion for  some  new  and  expensive  article,  he  must  de- 
termine whether  it  is  a  luxury  or  an  economy ;  and 
to  determine  this,  he  must  technically  analyze  the 
situation,  and  also  the  man  making  the  requisition. 
He  is  far  more  likely  to  send  the  order  through  if 
he  is  satisfied  that  the  requisitor  is  reliable  and 
himself  capable  of  analyzing  the  situation.  If  he 


PERSONAL  QUALIFICATIONS  9 

knows  that  the  man  is  inclined  to  desire  a  purchase 
without  proper  consideration  of  all  phases  of  the 
matter,  he  must  follow  a  different  procedure.  The 
opportunity  for  analysis  of  purchase  requirements 
is,  of  course,  unending,  and  a  man  without  a  very 
marked  ability  of  practical  analysis  is  a  hopeless 
waster  in  a  position  of  purchasing  executive.  Both 
the  men  in  his  own  firm  and  the  sellers  of  goods  are 
constantly  bringing  unanalyzed  recommenda- 
tions for  his  decision  and  the  ratio  of  his  value 
to  his  firm  is  the  ratio  of  his  success  at  analyz- 
ing these  recommendations  down  to  their  bedrock 
fact. 

Self-reliance. — It  is  approximated  that  from  forty 
to  forty-five  per  cent  of  the  operating  expense  of 
the  average  business  concern  is  controlled  by  the 
purchasing  department.  It  naturally  follows  .that 
the  mail  at  the  head  of  this  department  must  of  ne- 
cessity have  the  ability  to  spend  this  large  percent- 
age wisely.  In  order  to  do  this  he  must  believe  in 
himself  and  be  able  to  state  his  beliefs  convincingly. 
To  be  successful  in  any  line  of  endeavor  one  must 
have  faith  i"n  one's  own  opinions  and  decisions,  and 
must  be  able  to  combat  opposition  with  clear  reason- 
ing and  concrete  facts.  In  purchasing  management, 
more  than  in  most  other  professions,  confidence  in 
the  certainty  of  one's  knowledge  is  essential,  since 
the  responsibility  is  so  clearly  financial. 

One  -of  the  traits  often  lacking,  however,  in  the 
purchase  executive  is  self-reliance.  In  too  many  in- 
stances, the  backing  of  the  concern  with  which  he 


10        THE  SCIENCE  OF  PURCHASING 

is  connected  forms  a  barrier  behind  which  he  en- 
trenches himself,  growing  to  depend  more  and  more 
upon  this  backing  than  upon  himself.  This  habit  of 
dependence  is  likely  to  begin  at  the  point  of  contact 
with  the  seller's  representative  and  grow  gradually 
until  it  encompasses  his  association  with  all  mem- 
bers of  his  organization.  Lacking  confidence  in 
himself,  the  purchase  executive  frequently  allows  his 
decisions  to  be  set  aside  without  due  defense  of  his 
position  or  sufficient  discussion  of  his  reasons  for 
taking  his  stand,  seemingly  upon  the  side  of  the 
question  opposite  to  the  side  taken  by  the  other  de- 
partment heads.  Self-reliance,  when  not  developed 
to  the  point  of  conceit,  and  reinforced  by  clear  and 
careful  analysis  of  facts,  is  one  of  the  characteristics 
of  the  purchase  executive,  that  will  go  far  toward 
securing  for  him  the  authority  and  respect  due  him- 
self as  a  man  and  as  the  head  of  one  of  the  most  im- 
portant departments  of  his  organization.  No  bur- 
den of  responsibility,  such  as  a  bona  fide  purchasing 
executive  bears,  can  be  carried  without  a  great  deal 
of  self-reliance. 

Common  Sense. — To  a  larger  extent  than  in  many 
other  professions  the  purchasing  executive  is  de- 
pendent upon  his  innate  cotaimon  sense  for  the  suc- 
cessful accomplishment  of  his  duties.  There  are  col- 
lege courses  provided  for  the  engineer,  the  doctor, 
the  lawyer,  etc.,  and  many  books  to  which  to  refer. 
Modern  business  concerns  maintain  schools  for 
salesmen,  issue  pamphlets  of  instruction  and  provide 
a  library  of  books  upon  the  science  of  selling,  pro- 


PERSONAL  QUALIFICATIONS          11 

duction  and  other  duties ;  but  so  far,  little  has  been 
done  toward  aiding  the  purchase  manager  to  ad- 
vance in  his  profession.  Only  during  the  last  three 
of  four  years  have  courses  been  included  in  the  col- 
lege curriculum  that  cover  even  partially  the  tech- 
nicalities of  purchasing.  A  handful  of  books  have 
been  written  upon  the  subject;  and  the  only  library 
provided  for  the  purchase  manager  is  his  own  office 
file  of  data,  catalogues,  trade  journals,  etc.  He 
must  draw  almost  entirely  upon  his  highly  developed 
mental  alertness,  power  of  analysis  and  common 
sense  plus  the  acquired  knowledge  of  the  needs  of  his 
organization,  of  materials  required  and  the  general 
business  conditions  governing  the  buying  and  sell- 
ing of  that  material.  Technical  knojflf^e,  no  mat- 
ter how  exhaustive,  cannot  be  successfully  applied 
without  conimon  sense.  Technical  knowledge  is  es- 
sential for  the  specialized  profession ;  but,  as  in  prac- 
tical engineering,  technicaTTmowledge  is  but  a  start, 
the  native  practicality  and  solid  common  sense  of  a 
purchasing  agent  is  of  particular  value  to  his  firm. 
Direct  Action.— In  the  past,  direct  action  was  a 
phrase  unknown  either  to  the  purchasing  agent  or 
to  the  salesman.  Buying  was  a  leisurely  process 
arrived  at  through  slow  stages  of  amusing  anec- 
dotes ;  unimportant  gossip  of  the  road ;  luncheon  or 
dinner  with  perhaps  the  theater,  and  at  the  last  a 
brief  discussion  of  the  material,  price,  etc.  Under 
the  old  system,  a  purchasing  agent  could  see  but  one 
or  two  salesmen  during  a  day  and  his  designation 
of  "buffer"  was  to  a  large  extent  justified.  He  it 


12        THE  SCIENCE  OF  PURCHASING 

was  who  kept  the  salesman  occupied  and  left  the  way 
clear  for  the  real  head  of  the  purchasing  depart- 
ment to  transact  other  business.  The  salesman, 
realizing  that  he  was  dealing  with  a  "  figurehead, " 
a  mere  order  clerk  dignified  with  the  title  of  pur- 
chasing agent,  had  no  incentive  to  speak  at  any 
great  length  upon  the  merits  of  the  article  that  he 
wished  to  sell.  He  knew  that  the  real  authority  for 
the  purchase  must  come  from  "higher  up"  and  he, 
therefore,  entertained  the  purchasing  agent  in  the 
manner  in  which  that  agent  desired  to  be  entertained 
hoping  thereby  to  gain  a  hearing  before  the  real 
head  of  the  purchasing  department. 

Under  the  modern  system,  however,  ten  salesmen 
may  be  interviewed  in  the  same  length  of  time  that 
it  once  took  to  interview  two,  because  both  the  pur- 
chasing executive  and  the  salesman  realize  the  value 
of  direct  action  in  the  transaction  of  modern  busi- 
ness. To-day  the  time  element  is  the  important  fac- 
tor and  direct  action  is  absolutely  essential  for  the 
accomplishment  of  the  day's  routine.  The  ability 
to  come  to  the  point  immediately  is  an  asset  both 
to  the  purchasing  executive  and  to  the  salesman  with 
whom  he  is  conferring.  Lost  motion  is  one  of  the 
most  expensive  attributes  of  business.  Much  is 
gained  by  the  work  of  a  real  purchasing  executive 
who  knows  what  direct  action  is,  and  who  operates 
on  the  direct  action  principle ;  who  can  start  at  the 
beginning  and  carry  his  analysis  of  the  proposition 
clear  through  to  a  decision  with  no  halts  or  camou- 
flages or  mysterious  delays  and  reticences. 


CHAPTER  II 
KNOWLEDGE  OF  AIMS,  PLANS  AND  EESOUECES 

Intensive  Knowledge.-tThe  province  of  puchasing 
enjoins  extensive  knowledge  of,  and  ability  to  under- 
stand, all  -the  various  activities  of  business  in  gen- 
eral. It  demands,  to  an  even  greater  degree,  an 
intensive  knowledge  of  the  particular  business  for 
which  t^  director  pf  purchases  iaj)royi'ding  mater- 
ials and  supplies^  But  the  one  essential  around 
which  the  science  of  purchasing  revolves  is  the 
source  of  supply.  For  this  reason  it  is  imperative 
that  the  director  of  purchases  know: 

1.  Aims. 

2.  Plans. 

3.  Financial  resources. 

Aims. — To  be  cognizant  of  the  aims  of  the  concern 
with  which  he  is  connected  is  of  first  importance  to 
the  purchasing  executive  in  the  selection  of  his 
source  of  supply.  It  is  advisable,  in  the  case  of 
limited  capital  or  comparatively  small  orders,  to 
confine  the  purchases  to  a  few  of  the  more  reliable 
houses  handling  the  desired  material.  This  policy 
assures  the  development  of  cordial  relationship  be- 
tween the  buyer  and  the  seller  that,  obviously,  can- 
not be  possible  if  an  attempt  is  made  to  scatter  the 

13 


14        THE  SCIENCE  OF  PURCHASING 

purchases  over  a  broad  area.  There  will  be  times 
when  goods  might  be  obtained  from  a  new  concern 
or  a  firm,  bidding  for  new  business,  at  a  lower  price 
than  that  asked  by  the  firms  with  which  the  purchase 
manager  has  become  acquainted,  but  usually  it  will 
be  found  more  satisfactory  to  limit  the  number  of 
firms  with  which  the  small  buyer  is  dealing.  This 
makes  sure  of  prompt  attention  to  orders  and  the 
granting  of  a  possible  favor  at  times. 

If  the  concern  with  which  the  purchase  manager  is 
connected  is  small  but  has  as  its  aim  reorganization 
at  an  increased  capitalization,  it  behooves  the  ex- 
ecutive to  build  up  his  source  of  supply  in  anticipa- 
tion of  this  enlargement.  If  it  is  deemed  advisable 
by  the  owners  or  directors,  sellers  may  be  apprised 
of  the  company's  goal,  in  which  case,  the  benefit  of 
a  better  price  and  good  service  on  the  strength  of 
future  increased  business  is  gained. 

Plans. — Too  often  the  last  member  of  an  organi- 
zation to  receive  advice  as  to  curtailment  or  expan- 
sion of  the  rate  of  production  is  the  director  of 
purchases.  Unless  he  is  very  aggressive  and  keeps 
himself  in  the  foreground,  he  is  likely  to  find  him- 
self isolated  from  the  other  executives  of  his  firm 
and  in  ignorance  of  what  is  transpiring.  Without 
including  him  in  their  consultations,  the  heads  of 
the  different  departments  meet,  discuss  conditions, 
and  decide  what  they  consider  best  to  do.  If  there 
is  to  be  a  curtailment  of  production,  the  department 
heads  using  the  materials,  which  in  many  instances 
are  on  the  way  to  the  factory,  merely  refrain  from 


KNOWLEDGE  OF  AIMS  15 

sending  requisitions  to  the  storeroom.  If  an  in- 
crease in  the  output  is  decided  upon,  they  forward 
orders  for  an  increased  amount  of  materials  which, 
had  he  been  given  an  opportunity  to  say  so,  would 
have  to  be  purchased  on  an  unfavorable  market. 
There  are  many  cases  on  record  in  which  the  pro- 
duction and  sales  departments  outlined  plans  in- 
volving the  immediate  use  of  materials  that  could 
not  be  obtained  for  six  months  or  a  year. 

This  overlooking  of  the  purchase  executive  is  sel- 
dom, if  ever,  intentional,  but  rather  the  result  of  the 
general  false  idea  of  the  function  of  purchasing. 
The  task  of  bringing  the  other  executives  of  his 
organization  to  the  /point  of  recognizing  the  true 
place  of  purchasing  las  an  indispensable  cog  in  the 
wheel  of  business  management,  is  largely  a  matter 
for  the  purchasing  executive  himself.  He  must  not 
expect  his  title,  whatever,  it  may  be,  to  be  taken 
seriously  by  the  more  aggressive  men  about  him  if 
he  is  content  to  allow  himself  to  remain  in  the  back- 
ground, a  convenience  to  be  used  or  ignored  at  will. 
In  allegiance  to  his  employer,  and  in  justice  to  him- 
self, he  must  demand  and  insist  upon  his  place  in 
all  conferences  between  department  heads,  whether 
these  conferences  are  formal  or  informal.  It  is  by 
keeping  abreast  of  the  details  pertaining  to  his  busi- 
ness that  the  purchase  manager  is  able  to  make  his 
purchases  conform  to  the  plans  and  requirements  of 
his  firto  in  quality,  quantity,  price  and  delivery. 
He  must  neither  be,  nor  have  the  appearance  of 
being,  a  mere  order  clerk  or  "buffer"  for  salesmen. 


16        THE  SCIENCE  OF  PURCHASING 

Financial  Resources. — The  financial  standing  of 
his  firm  is  another  of  the  important  factors  in  suc- 
cessful purchase  management.  With  definite  infor- 
mation upon  available  funds  at  hand,  the  director  of 
purchases  knows  at  once  whether  or  not  he  may 
demand  and  receive  advantageous  terms  from  the 
seller.  He  should  also  be  informed  of  the  usual  and 
unusual  drafts  upon  the  resources  of  his  concern 
in  order  that  he  may  determine  the  advisability 
of  heavy  buying  or,  in  case  of  an  emergency,  that 
he  may  buy  lightly. 

A  general  knowledge  of  the  business  with  which 
he  is  connected  is  even  more  necessary  to  the  director 
of  purchases  than  to  the  sales  agent,  credit  man- 
ager, or  any  department  head.    He  must  possess  the 
salesmanager  's  knowledge  of  what  the  firm  manu- 
factures or  sells;  he  must  know  the  quantity  of 
goods  sold  in  the  past  and  the  rate  of  sales  past 
and  present  together  with  the  profit  thereon.    To 
him    the    manufacturing   department's    cost    sheet 
should  be  accessible  at  all  times.    Spending,  as  he 
does,  so  large  a  percentage  of  his  firm's  money  he 
must  keep  informed  in  every  way  possible  as  to 
the  financial  condition  of  his  business.    It  is  only  by 
direct  knowledge  of  the  intentions  of  the  directors 
and  executives  toward  curtailment  and  expansion 
and  by  open  discussion  of  ways  and  means  of  carry- 
ing out  these  plans  that  the  purchase  manager  may 
govern  his  purchases  in  accord  with  quality  and 
quantity  of  output  under  different  conditions.     The 
purchasing  executive  who  does  not  know  the  aims, 


KNOWLEDGE  OF  AIMS  17 

plans,  financial  resources  and  credit  rating  of  his 
firm  cannot  hope  to  make  a  success  of  his  profession. 

Differences  between  Credit  and  Resources. — There 
is  a  great  difference  between  credit  and  resources, 
though  the  two  terms  are  often  confused.  Credit 
is  moral  standing.  Eesources  is  financial  standing. 
Credit  depends  upon  the  reputation  derived  from  the 
confidence  inspired  in  others.  It  is  not  a  value  in 
itself  but  represents  a  value.  In  business,  credit  is 
the  exchange  of  a  commodity  for  a  promise.  If  the 
credit  of  the  person  or  firm  negotiating  for  the  com- 
modity is  not  good,  the  person  owning  the  com- 
modity will  very  likely  refuse  to  accept  the  promise 
of  payment.  In  other  words,  if  moral  standing  is 
bad,  credit  will  not  be  /Extended. 

Kesources,  being  pecuniary  means,  is  a  tangible 
asset.  It  is  money  or  property  that  may  be  con- 
verted into  supplies  or  given  in  exchange  for  sup- 
plies. It  may  be  seen  or  touched.  But  the  pres- 
ence of  substantial  financial  resources  does  not  neces- 
sarily mean  that  the  credit  of  a  firm  is  good.  Very 
often  the  most  solvent  of  concerns  is  forced  to  the 
wall  because  of  its  questionable  moral  standing. 
Slow  payment  of  bills,  short  sighted,  money-grab- 
bing methods  of  dealing  that  verge  upon  sharp  prac- 
tice, all  tend  to  lower  the  credit  standing  of  a 
financially  responsible  concern. 

A  firm  having  limited  resources  may  be  rated 
"credit  good,"  providing  its  moral  standing  is  above 
reproach  and  it  is  known  to  pay  its  bills  promptly. 
Credit  is  faith.  It  is  belief.  It  is  expectation  of 


18        THE  SCIENCE  OF  PURCHASING 

future  payment.  If  this  belief  is  lost,  resources  re- 
solve into  the  amount  possible  of  recovery  by  law 
on  the  part  of  the  creditor. 

Broadly  speaking,  it  is  more  important  to  know 
the  credit  of  a  prospective  seller  than  to  know  his 
financial  standing.  For  financial  standing  may  exist 
without  a  vestige  of  credit,  while  the  firm  with  a 
high  credit  rating  may  be  considered  a  dependable 
source  of  supply  even  though  it  is  known  to  be  oper- 
ating ' '  on  a  shoe  string. ' '  Moral  standing  is  always 
preferable  to  financial  standing,  be  it  in  the  business 
world  or  in  the  world  of  individuals. 


CHAPTER  HI 
SOURCE  OF  SUPPLY 

The  Necessity  for  a  Coterie  of  Selling  Firms. — 
Just  as  an  intimate  knowledge  of  his  own  concern 
is  essential  to  the  purchasing  executive,  so  also  is 
an  expert  understanding  of  the  affairs  of  the  firm 
from  whom  he  makes  his  purchases. 

The  necessity  for  a  coterie  of  selling  firms  that 
may  be  termed  Dependable  as  well  as  Reliable,  is 
becoming  more  and  more  apparent  to  the  modern 
purchasing  executive.  During  the  war,  with  its  at- 
tendant increase  in  demand  and  decrease  in  supply, 
the  purchasing  director  discovered  that  few  houses 
could  be  depended  upon  even  though  they  had  been 
considered  reliable  under  normal  conditions.  Un- 
doubtedly, many  sellers  suffered  loss  of  their  cus- 
tomers' faith  and  are  to-day  omitted  from  the 
Honor  Roll  of  Dependables,  through  no  fault  of  their 
own.  These  firms  are,  in  turn,  editing  their  own 
Honor  Roll  as  a  result  of  bitter  experience  with  the 
failure  of  their  own  sources  of  supply  to  deliver. 

With  the  gradual  return  to  normal  business  con- 
ditions and  the  readjustment  to  the  new  conditions 
developed  from  the  trials  of  war  times,  the  purchas- 
ing executive  is,  more  than  ever  before,  anxious  to 

19 


20        THE  SCIENCE  OF  PURCHASING 

create  for  himself  a  list  of  Dependables  compiled 
from  his  list  of  Reliables,  for  he  has  realized  that  a 
dependable  source  of  supply  means  that  his  daily 
business  is  half  completed  before  his  desk  is  opened 
in  the  morning. 

Difference  between  Reliable  and  Dependable 
Sources  of  Supply. — A  house,  to  be  considered  Reli- 
able, must  be  able  to  furnish  quality,  quantity,  price 
and  delivery.  It  must  be  reputable,  financially 
sound,  equipped  to  do  what  it  says  it  will  do,  and 
scrupulous  about  delivering  quality  and  quantity  as 
compared  with  samples  and  invoices.  A  firm,  which, 
upon  investigation,  shows  that  it  is  able  to  do  all 
these  things,  may  be  considered  eligible  to  the  Re- 
liable Roll.  Only  by  experience  may  the  purchase 
director  assure  himself  of  the  dependability  of  the 
firms  listed  as  reliable.  A  firm  that  is  able  to  fur- 
nish quality,  quantity,  price  and  delivery  may,  for 
reasons  that  appear  to  be  weighty,  fail  to  live  up 
to  its  contract.  There  may  be  a  strike,  a  fire,  a 
shortage  of  materials  or  an  unexpected  tie-up  in 
shipping  facilities.  A  house,  to  be  considered  De- 
pendable, must  show  a  willingness  to  live  up  to  its 
contracts  no  matter  what  difficulty  may  arise  be- 
tween the  time  of  acceptance  of  the  order  and  its 
delivery.  It  must  not  only  be  able  to  furnish 
quality,  quantity,  price  and  delivery,  but  must  do  so 
without  fail.  In  addition  to  the  qualifications  de- 
manded of  the  Reliable  source  of  supply  is  that  in- 
tangible asset  called  Service  or  Courtesy. 

To  sum  up,  a  Dependable  source  of  supply  is  one 


SOURCE  OF  SUPPLY  21 

which  has  all  the  qualifications  of  a  Reliable  sor_rce 
plus  Service.  The  purchasing  executive  who  has 
completed  his  Honor  Roll  of  Dependables  is  fortu- 
nate indeed,  for  he  can  then  place  any  order  from 
one  dollar  to  one  thousand  dollars,  or  upward,  and 
pass  the  order  along  to  the  files  as  completed. 

How  to  Locate  the  Source  of  Supply.— In  order 
to  find  out  where  he  may  obtain  his  materials,  the 
purchasing  executive  has  many  sources  of  informa- 
tion. From  trade  papers,  advertisements  and  clas- 
sified business  directories  he  may  secure  the  names 
of  firms  dealing  in  the  commodity  desired.  These 
firms  should  be  considered  merely  as  possible 
sources  of  supply.  The  purchasing  executive  must 
sift  these  possibilities  over  and  <iver  again  through 
an  ever  diminishing  net.  The  possibilities  are 
myriad  in  many  lines  of  purchasing.  Through  the 
process  of  elimination  the  probable  sources  of  supply 
may  be  discovered.  These  in  turn  are  sorted  until 
the  reliable  firms,  specializing  in  the  particular  com- 
modity desired,  are  arrived  at.  Then  a  sample 
order  may  be  submitted  and  the  selling  firm  may  be 
allowed  to  eliminate  itself  or  to  prove  its  depend- 
ability. 

Trade  papers  and  advertisements  are  reliable 
sources  of  information  in  so  far  as  the  papers  them- 
selves are  reliable.  Many  trade  papers  and  other 
magazines  carrying  advertising  require  a  guaranty 
of  faith  before  accepting  an  advertisement,  but  even 
these  high-class  publications  are  occasionally  in 
error.  Classified  business  directories  are  to  be 


22        THE  SCIENCE  OF  PURCHASING 

found  in  most  cities  and  are  of  occasional  assistance 
in  securing  the  names  of  firms  dealing  in  certain 
commodities.  Reliable  registers  such  as  Thomas' 
or  Hendrick's  furnish  complete  lists  of  producers  of 
all  articles  and  materials  throughout  the  country. 

From  such  sources  must  the  purchasing  executive 
secure  information  as  to  the  possible  source  from 
which  his  supply  will  come.  Often  the  list  will  be  so 
long  that  he  will  wish  to  give  up,  in  which  case  he 
may  ask  the  salesman  representing  a  house  dealing 
in  some  allied  line.  For  example,  the  salesman  for 
a  condensed-milk  concern  will  gladly  refer  to  an- 
other firm  handling  powdered  or  evaporated  milk; 
a  representative  of  a  paving-brick  firm  knows  of 
several  firms  supplying  building  or  fire  brick,  etc. 
Inquiry  through  allied  lines  is  often  the  most  effica- 
cious method  of  securing  information  as  to  the  best 
firms  and  it  is  certainly  simpler  than  running  down 
a  list  of  manufacturers,  jobbers  and  small  dealers  in 
a  classified  directory. 

Many  boards  of  trade  and  chambers  of  commerce 
throughout  the  country  publish  booklets  listing  the 
various  business  activities  of  their  members.  Such 
organizations  hold  themselves  ready  to  supply  in- 
formation concerning  the  firms  listed,  information 
which  may  be  depended  upon  up  to  a  certain  point. 
Manufacturers'  associations  also  supply  data  upon 
inquiry,  but  it  is  not  to  be  expected  that  any  organi- 
zation will  deliberately  go  about  to  warn  a  prospec- 
tive customer  of  one  of  its  members  against  deal- 
ing with  that  member. 


SOURCE  OF  SUPPLY  23 

Standing  of  the  Probable  Source  of  Supply.— In 

selecting  the  seller'  whom  the  purchase  manager 
hopes  to  depend  upon  for  his  supply  of  certain 
materials,  it  is  imperative  that  the  standing  of  that 
firm  be  investigated  thoroughly.  He  must  make 
sure  that  the  firm  in  whose  hands  he  places  an 
order  to  be  delivered,  perhaps  six  months  hence,  is 
financially  sound.  Especially  in  purchasing  machin- 
ery which  will  require  future  repairs  and  supplies, 
must  he  ascertain  the  standing  of  the  firm  from 
which  he  makes  the  purchase.  It  is  essential  that 
he  take  this  means  of  protecting  hi£  firm  and  him- 
self from  the  loss  of  the  entire  cost  (of  the  machinery 
through  the  dissolution  or  disappearance  of  the  firm 
from  which  it  was  purchased.  In  placing  an  order 
for  some  specially  made  article  the  purchasing  ex- 
ecutive must  have  all  possible  assurance  that  his 
source  of  supply  is  dependable. 

From  such  sources  as  Dun's,  Bradstreet's  and 
Moody 's  the  rating  and  names  of  the  officers  of  al- 
most all  concerns  may  be  obtained.  Commercial 
agencies  such  as  Proudfoot's  and  Dun's  furnish 
special  reports  upon  request  and  the  payment  of  a 
fee.  These  reports  give  the  history  of  the  firm  in- 
vestigated as  to  fires,  strikes,  etc.,  but  nothing  about 
their  ability  to  fill  their  contracts  or  their  policies 
toward  their  customers. 

Policies  and  Principles  of  the  Seller. — Undoubt- 
edly, it  is  quite  as  essential  to  know  the  policies  of 
the  seller  as  it  is  to  know  his  financial  standing.  It 
is.  his  policy  toward  his  customers  that  makes  him  a 


24        THE  SCIENCE  OF  PURCHASING 

dependable  source  of  supply.  His  rating  may  be 
quite  high  while  his  reliability  may  be  at  the  lowest 
possible  point  so  far  as  the  purchasing  executive  is 
concerned. 

The  policies  of  a  concern,  aside  from  those  firms 
using  their  policies  for  advertising  purposes,  are 
frequently  difficult  to  learn.  The  purchasing  direc- 
tor is  often  forced  to  discover  them  by  experience 
alone.  Having  looked  up  the  rating  and  made  sure 
of  the  ability  of  the  seller  to  carry  out  his  contract, 
there  is  no  way  to  learn  more  save  by  a  trial  order, 
and  this  is  not  always  sufficient  to  prove  the  de- 
pendability of  a  firm.  From  the  representative  of 
the  seller,  the  purchasing  executive  may  glean  much 
that  will  help  him  to  decide  for  himself.  The  firm 
that  is  not  reliable  very  often  has  men  who  are  un- 
reliable— noticeably  so.  On  the  other  hand,  firms 
operating  on  a  set  of  open  and  above-board  policies 
will  not  employ  salesmen  who  are  liable  to  discredit 
them. 

Need  for  Purchasing  Agents'  Associations. — 
From  other  purchasing  executives  much  may  be 
learned,  and  this,  perhaps,  is  one  of  the  best  rea- 
sons for  the  organization  of  the  Purchasing  Agents' 
Association  which  has  branches  in  all  large  and 
many  of  the  smaller  cities.  The  opportunity  to  talk 
over  and  form  opinions  of  buyers,  has  long  been  the 
salesmen's  exclusive  property.  Frequently,  a  new 
salesman  knows  all  about  the  purchasing  executive 
upon  whom  he  is  going  to  call,  from  his  disposition 
down  to  his  pet  hobby  or  the  way  he  brushes  his 


SOURCE  OF  SUPPLY  25 

hair  to  cover  his  bald  spot.  The  salesman  knows, 
through  other  salesmen  whom  he  meets  in  the  hotels 
and  on  the  trains,  the  policies  of  the  firms  and  of 
the  individuals  with  whom  he  hopes  to  do  business. 

But  the  purchasing  executive,  because  of  his  ob- 
ligation to  see  all  salesmen  who  call  upon  his  firm,  is 
unable  to  get  out  to  any  extent.  In  former  times, 
it  was  considered  bad  policy  for  a  purchasing  agent 
to  discuss  his  business  and  the  firms  with  whom  he 
dealt  with  other  purchasing  agents.  There  seemed 
to  exist  an  erroneous  impression  amoiuf  purchasing 
agents  that  each  must  hold  himself  iloof  from  all 
others  in  the  same  profession.  In  this  way,  some 
advantage  was  supposed  to  be  gained  over  the 
others.  How,  nobody  seems  to  know. 

Under  modern  business  methods,  union  is  con- 
sidered strength,  and  purchasing  executives  are 
banding  together  to  help  each  other.  Through  meet- 
ings, formal  and  informal,  much  valuable  informa- 
tion is  gathered  about  many  subjects,  and  particu- 
larly is  the  alert  purchasing  executive  enabled  to 
learn  of  the  policies  of  the  firms  with  which  he  is 
doing,  or  is  about  to  do,  business. 

Knowing  the  standing,  the  history  and  the  general 
manner  of  conducting  business  of  the  selling  con- 
cern, the  purchasing  executive  is  able  to  place  his 
order  in  the  hands  of  a  reliable  seller  with  reason- 
able assurance  that  the  order  will  be  filled  according 
to  specifications. 


CHAPTEE  IV 
PRINCIPLES  AND  POLICIES 

Vital  Need  of  Definite  Organization  Policies.-— 

The  purchasing  agent  must  study  the  principles 
and  policies  of  the  people  from  whom  he  buys ;  he 
should  also  formulate  principles  and  establish  poli- 
cies to  guide  himself  in  his  dealings  with  them  and 
in  his  dealings  with  the  various  departments  of  his 
own  concern.  We  shall  consider  first  the  principles 
and  policies  of  the  group  of  sellers,  with  which  he 
does  business,  then,  after  getting  a  clear  notion  of 
what  constitutes  a  business  principle  and  a  policy, 
we  shall  treat  those  which  the  purchasing  agent 
should  develop  to  guide  his  own  conduct. 

As  he  looks  over  the  various  concerns  from  which 
he  may  make  purchases,  he  will  endeavor  to  discover 
those  which  have  established  policies  pleasing  to 
him,  because  they  tend  to  result  in  better  service  to 
his  firm.  By  a  policy  we  mean  a  well-defined  course 
of  business  conduct  wlihsiris'  pursued  because  it  is 
considered  expedient  and  conducive  to  success. 

The  foremost  requirement  of  any  undertaking, 
which  deals  in  any  way  with  the  uncertainty  of  the 
human  element  and  business  conditions,  is  a  well- 
defined  policy.  This  necessity  was  realized  long- 
ago,  but  the  result  of  the  realization  was  not  far- 

26 


PRINCIPLES  AND  POLICIES  27 

reaching.  It  was  applied  only  to  the  sales  depart- 
ment, since  it  was  through  that  channel  that  the 
effect  of  the  lack  of  policies  was  first  felt  and  ana- 
lyzed. With  the  development  of  goodwill  through 
sales  policies  came  the  appreciation  of  the 
vital  importance  of  general  policies  to  be  adhered  to 
by  the  entire  organization.  The  habit  of  living  only 
in  the  immediate  present  has  been  overcome  by  slow 
steps,  and  correct  and  adequate  policies  have  been 
formulated  by  general  managers,  boards/of  directors 
and  executives  of  modern  business  concerns  with 
very  decided  success. 

It  has  been  discovered  thai  firm  policies,  rigidly 
applied,  are  valuable  to  every  member  of  every  de- 
partment of  the  modern  business  organization. 
There  is  a  certain  group  of  things  which  requires 
policies  in  almost  any  business.  The  following  list 
of  policies  may  be  helpful  in  checking  up  established 
policies  and  in  evolving  more  adequate  policies  than 
those  in  use: 

1.  Giving  a  guaranty  that  guarantees. 

2.  Living  up  to  all  promises  made. 

3.  Giving  courtesy  and  service  without  stint. 

4.  Maintaining  standard  quality  of  goods. 

5.  Making  no  claim  for  goods  that  are  not  proved, 
by  experiment  and  analysis,  to  be  absolutely 
true. 

6.  Maintaining  standard  price  and  discount  scale. 

7.  Pair  treatment  of  all  customers,  large  or  small. 

8.  Open  and  above-board  dealing  with  all  com- 
petitors. 


28        THE  SCIENCE  OF  PUECHASING 

9.  Policy  toward  employees. 

10.  Policy  toward  methods  of  accounting. 

11.  Financial  policy. 

12.  Uniform  credit  policy. 

13.  Open  and  above-board  policy  of  salesmanship 
and  sales  methods. 

14.  Clean-cut  purchase  policy. 

15.  Policy  in  accord  with  law,  ethics,  society  and 
economics. 

16.  Ironclad    rules    against    swerving   from    set 
policy  without  due  consideration. 

17.  Policy  of  cooperation  and  coordination  within 
the  organization. 

Difference  between  Policy  and  Principle. — To 
differentiate  between  the  policies  and  the  principles 
of  a  firm  is  difficult,  because  the  line  of  demarcation 
is  sometimes  faint.  There  is  a  discriminating 
definition,  however,  with  which  it  behooves  the 
purchasing  executive,  as  well  as  the  heads  of 
other  departments,  to  become  thoroughly  fami- 
liar. 

A  policy  may  be  defined  as  a  line  of  conduct 
arrived  at  through  experience  and  consideration  of 
the  customs  and  conditions  governing  the  particular 
business  for  which  the  policy  is  established.  It  is 
built  up  to  fit  a  condition  and  is  adhered  to  by  all 
members  of  the  organization  just  as  long  as  that 
condition  obtains  and  no  longer.  It  should  not, 
however,  be  modified  or  changed  without  careful 
thought  and  open  discussion. 

A  principle  is  a  precept,  frequently  evolved  from 


PRINCIPLES  AND  POLICIES  29 

an  established  policy  that  has  become,  through 
usage  and  precedent,  an  inexorable  law.  A  policy 
may  be  deviated  from  at  any  time  or  it  may  be 
changed,  indeed,  should  be  changed,  to  conform  with 
existing  circumstances.  A  principle  is  regarded  as 
invariable  and  may  not  be  altered  without  shaking 
the  entire  foundation  of  the  business  which  stands 
upon  it. 

When  a  number  of  firms  dealing  in  a  /certain 
"line"  of  materials  adopt  the  same  general  poli- 
cies, these  are  known  as  i  '  trade  customs. ' '  Usually, 
the  basis  upon  which  a  trade  custom  is  established 
is  firm  and  works  to  the  best  advantage  of  buyer 
and  seller.  There  are  "  trade  customs, "  however, 
that  are  better  called  "trade  evils,"  and  as  such 
are  slowly  being  investigated  by  the  Federal  Trade 
Board  and  eliminated  or  altered.  The  United 
States  Steel  Corporation,  whose  practice  it  has  been 
to  guarantee  price  against  decline,  is  a  case  in 
point.  This  price  guaranty  is  a  form  of  rebate, 
and,  as  such,  is  not  only  unfair  practice  but  illegal 
as  well. 

That  which  is  one  firm's  policy  may  be  another 
firm's  "principle."  For  example,  one  concern  may 
consider  the  discounting  of  bills  as  a  principle  to  be 
complied  with  regardless  of  the  difficulty  and  ex- 
pense that  may  be  involved.  With  another  concern, 
discounting  bills  is  considered  a  good  policy  which 
may  be  set  aside  when  deemed  advisable.  Many 
selling  concerns  depend  upon  the  lure  of  the  dis- 
count to  bring  in  the  money  with  which  to  discount 


30        THE  SCIENCE  OF  PURCHASING 

their  own  bills  and  those  firms,  which  have  as  their 
principle  the  meeting  of  the  ten-day  clause,  or  what- 
ever the  time  limit  specified  on  the  invoice,  are  con- 
sidered the  most  desirable  customers  and  will,  as 
a  result,  obtain  the  best  possible  service.  The  satis- 
factory relations  with  selling  concerns,  brought 
about  by  the  establishment  of  such  a  principle,  is 
well  worth  the  occasional  expense  of  borrowing  the 
money  with  which  to  meet  the  bills,  even  though 
the  rate  of  interest  on  the  loan  amounts  to  more 
than  the  discount. 

One  firm  may  object  to  a  certain  practice  on  prin- 
ciple, while  another  merely  considers  the  practice  a 
poor  policy.  It  may  be  the  policy  for  one  firm  to 
display  openly  all  bids  received  while  with  another, 
bids  are  held  in  strictest  secrecy.  One  firm  may 
buy  entirely  on  merit,  another  may  place  as  many 
orders  as  possible  with  those  sellers  from  whom 
reciprocal  business  may  be  expected  regardless  of 
merit. 

Selling  firms  often  advertise  their  policies,  or 
take  some  one  policy  as  a  keynote  and  keep  it  before 
the  public  until  it  becomes  as  familiar  as  the  name 
of  the  firm  itself.  This  method  of  advertising  is 
undoubtedly  a  good  one  from  the  sales  point  of  view. 

The  following  list  gives  some  of  such  featured 
policies : 

Loft's  Candy Penny  a  Pound 

Profit. 

H.  J.  Heinz  Co Purity  and  Great 

Variety  (57). 


PEINCIPLES  AND  POLICIES  31 

Hudson  River  Tunnels Let  the  Public  Be 

Pleased. 

W.  S.  Wilson  Corporation. .  The  Service  That 

Never  Ceases. 

National  City  Bank Extreme  Prompt- 
New  York  ness  Achieved 

through  a  Day 
and    Night     / 
Staff. 

Bearing  of  Sales  Policies  upon  Purchasing. — The 
Purchasing  executive  and  his  department  must  of 
necessity  reap  many  benefits  from  well-established 
sales  policies.  Sellers  are  anxious  to  add  to  their 
list  of  customers  firms  that  are  known  for  their  fair 
dealing  and  upright  principles.  If  the  fair  dealing 
and  uprightness  stops  with  the  sales  department, 
much  of  the  value  of  advertising  is  lost.  Selling 
firms  are  entitled  to  believe  that  a  complete  set  of 
rigidly  enforced  selling  policies  indicate  an  equally 
complete  and  rigidly  enforced  set  of  general  policies, 
including  those  governing  the  purchases  of  materi- 
als and  supplies.  Finding  that  this  is  not  true 
weakens  the  faith  of  the  seller  in  its  customer  and 
decreased  service  is  the  result. 

Purchasing  policies  must  be  of  equal  fairness  and 
strength  as  those  of  the  sales  or  credit  departments. 
The  purchase  director  should  know  all  policies  of 
his  firm  and  adhere  to  them  unfalteringly  in  drawing 
up  policies  for  his  own  department.  Each  general 
policy  should  be  analyzed  and  a  purchasing  policy 
drawn  up  that  will  coincide  with  those  drawn  up  by 


32        THE  SCIENCE  OP  PURCHASING 

the  managing  executives  or  board  of  directors. 
Each  sales  policy  should  be  analyzed  both  from  the 
selling  and  the  buying  viewpoint,  and  purchasing 
polici'es  decided  upon  with  the  seller  as  well  as  the 
purchaser  always  in  mind.  The  following  are  some 
of  the  points  for  which  there  should  be  purchase 
policies : 

1.  All  specification  furnished  seller  should  be 
complete  and  accurate. 

2.  All  orders  should  be  correctly  written  with  at- 
tention to  special  stipulations  made  by  sel- 
ler. 

3.  Demands  made  upon  seller  should  be  within 
reason. 

4.  All  promises,  verbal  or  written,  should  be  ful- 
filled. 

5.  Sellers    should    be    forced    to    keep    their 
promises. 

6.  Insist  that  salesman  give  his  best  proposition 
first. 

7.  Refuse  to  be  a  party  to  price  beating. 

8.  See  that  purchasing  methods  are  ethical  and 
legal. 

9.  Avoid  any  method  that  even  verges  on  sharp 
practice. 

10.  Sign  no  contract  that  works  to  the  disadvan- 
tage of  other  purchase  executives  less  fortu- 
nately placed. 

11.  See  that  all  letters  are  calculated  to  make 
the  best  possible  impression  upon  the  recip- 
ient. 


PEINCIPLES  AND  POLICIES  33 

Purchasing  Executive's  Policy  toward  His  Organi- 
zation.— Having  ascertained  the  line  of  conduct  to 
which  he  must  adhere  as  a  representative  of  his  com- 
pany, and  having  drawn  up  a  list  of  policies  to  be 
followed  in  his  relation  to  his  source  of  supply,  the 
purchasing  executive  should  look  to  his  own  per- 
sonal conduct  toward  his  organization.  Whatever 
the  principles,  whatever  the  policies  of  his  concern, 
the  purchasing  executive  should  himself  be  above  re- 
proach. Even  though  he  is  hampered  by  weak, 
wrong  or  entire  absence  of  general  policies,  he  may 
still  draw  up  a  standard  for  his  own  conduct  and 
the  conducting  of  his  department.  He  may  thus 
counteract  a  part  of  the  effect  of  his  firm's  short- 
sighted laxity. 

In  his  relation  to  the  organization  the  purchasing 
executive  may  not  only  apply  the  following  policies 
but  may  even,  through  example,  show  the  managing 
directors  and  other  executives  the  beneficial  effect 
of  sound  policies. 

1.  Unfailing  loyalty  to  his  organization. 

2.  Intelligent  cooperation  and  coordination  with 
other  departments. 

3.  Assist  accounting  department  in  keeping  credit 
good  by  prompt  passing  of  invoices. 

4.  Use  every  means  of  saving  money  without 
curtailing  any  department  of  materials  and 
supplies. 

5.  Assist  the  factory  in  maintaining  a  standard 
quality   of  output  and  continuity   of   opera- 
tion. 


34        THE  SCIENCE  OF  PURCHASING 

6.  Insist  that  other  departments  assist  him  in 
every  possible  way  in  the  discharge  of  his 
duty  to  his  firm. 

7.  Unfailing  courtesy,  reasonableness  and  under- 
standing toward  those  "higher-up,"  those 
equal,  and  those  beneath  hiim  in  rank. 
Importance  of  Goodwill. — Goodwill,  while  intan- 
gible, is  unquestionably  property,  and,  as  such,  is 
subject  to  transfer  from  one  person  to  another.  It 
may  be  sold,  just  as  the  building,  fixtures,  and 
merchandise  of  a  firm  may  be  sold,  despite  the  fact 
that  it  is  merely  a  "probability  that  old . customers 
will  resort  to  the  old  place"  (Lord  Eldon),  and  it 
brings  a  good  price.  Goodwill  is  the  status  of  a 
concern  with  the  firms  or  individuals  with  which 
business  is  transacted  and,  as  such,  depends  upon 
sound  policies  consistently  adhered  to.  From  the 
sales  point  of  view  it  is  the  most  important  ingredi- 
ent of  the  merchandise  sold.  Public  service  corpo- 
rations have  long  realized  the  importance  of  the 
public  attitude.  Manufacturing  concerns  often  feel 
the  need  of  public  goodwill,  but,  as  a  rule,  look 
to  the  sales  department  to  develop  this  evanescent, 
intangible,  indefinable,  yet  vital,  element  of  business 
success. 

While  goodwill  is  largely  a  matter  of  here  to-day 
and  gone  to-morrow,  it  is  perhaps  easier  for  the 
purchasing  executive  to  acquire  and  hold  it  for 
himself  and  his  department  than  for  the  salesman- 
ager.  The  purchasing  executive  is  not  required  to 
study  mass  psychology  nor  to  study  ways  of  bring- 


PRINCIPLES  AND  POLICIES  35 

ing  his  organization  to  efficiency  in  carrying  out 
his  policies.  In  comparison  with  the  number  of 
people  with  whom  the  sales  force  comes  in  contact, 
the  few  salesman  calling  upon  the  purchasing 
executive  are  negligible.  Alone  and  unassisted^the 
purchasing  executive  may  develop  the  goodwill  of 
his  source  of  supply  merely  through  the  personal 
touch.  If,  upon  meeting  the  salesman,  he  puts 
across  his  honesty,  reliability,  and  straightforward 
business  principles,  and  if  he  is  able,  not  only  to 
establish,  but  to  adhere  to,  sound  purchasing  policies 
and  maintain  his  standards  of  buying,  he  will 
acquire  the  goodwill  of  that  representative  and 
through  him,  the  goodwill  of  the  house  represented. 
By  cooperation  with  the  accounting  department  in 
prompt  payment  of  bills  the  purchase  director  may 
hold  the  goodwill  of  his  sellers  for  an  indefinite 
period. 


CHAPTER  V 
ATTITUDE  TOWARD  SALES  SOLICITATION 

Importance  of  Right  Relationship  between  Buyer 
and  Sellers. — Correct-functioning  relationship  be- 
tween the  different  department  heads  within  the 
modern  business  organization  has  long  been  recog- 
nized as  vital.  But  it  is  only  in  recent  years  that 
the  functional  relationship  between  the  buyer  of  one 
firm  and  the  salesman  of  another  has  been  seriously 
considered.  The  modern  purchasing  agent  has  at 
last  awakened  to  the  great  possibilities  of  coope- 
ration with  the  representatives  of  his  source  of 
supply,  and  it  is  this  realization  of  the  practical 
benefits  to  be  derived  from  concordance  with  the 
seller  that  is  causing  rapid  change  in  the  pur- 
chasing executive's  manner  and  attitude  of  mind 
toward  sales  solicitation. 

Old  Method  of  Selling  and  Buying.— In  the  past 
the  salesman  who  succeeded  was  the  one  whose  sheer 
personality  appealed  to  the  greatest  number  of 
customers  in  his  territory.  His  success  could  be 
measured  by  the  degree  of  friendship  he  could  in- 
spire in  the  buyer  upon  whom  he  called.  Often 
his  expense  account  was  unlimited  and  he  was  given 
carte  blanche  to  * ' go  as  far  as  he  liked"  in  the  matter 

36 


SALES  SOLICITATION  37 

of  entertaining  the  buyer.  He  provided  elaborate 
meals,  theater  tickets,  and  even  more  substantial 
evidences  of  favor,  and  usually  if  the  buyer  was 
in  need  of  supplies,  the  salesman  went  away  with 
an  order. 

Unless  through  previous  use  of  the  materials  the 
purchasing  agent  or  " buyer"  (as  he  usually  was 
called  then)  often  knew  nothing  about  the  materials 
for  which  he  had  given  his  order  except  what 
meager  details  the  salesman  chose  to  give  him. 
Very  often  he  had  other  responsibilities  and  looked 
upon  the  buying  of  supplies  as  a  side  issue.  Fre- 
quently, too,  his  duties  were  those  of  a  clerk  and 
his  authority  almost  nil,  in  which  event  the  sales- 
man talked  as  little  about  business  as  possible  and 
depended  upon  his  personality  and  ability  as  an 
entertainer  to  inspire  the  nominal  buyer  to  put 
in  a  good  word  for  the  selling  concern.  How  far 
and  to  what  unscrupulous  lengths  this  mode  of  sell- 
ing went  is  covered  elsewhere  in  a  consideration 
of  commercial  bribery. 

Much  time,  energy  and  money  were  wasted  under 
the  old  system  of  buying,  and  the  gradual  dis- 
appearance of  the  customs  of  the  past  is  welcomed 
by  buying  and  selling  concerns  with  equal  satisfac- 
tion. We  are  now  fairly  well  launched  upon  an 
era  of  greater  commercial  straightforwardness, 
which  is,  in  many  ways,  altering  selling  methods 
and  therefore  purchasing  methods  also ;  introducing 
what  might  properly  be  called  a  new  policy  of  re- 
lationship between  buyer  and  seller.  It  is  the  rout 


38        THE  SCIENCE  OF  PURCHASING 

of  the  old  maxim  "caveat  emptor"  ("let  the  buyer 
be  ware  "). 

New  Method  of  Selling  and  Buying.— With  the 
advent  of  the  more  scientific  era  in  all  aspects  of 
production,  affecting  also,  naturally,  the  modern 
purchasing  executive,  the  seller  has  been  forced  to 
change  his  selling  tactics.  To-day  the  man  who 
buys  knows  as  much  and  often  more  about  the  goods 
he  buys  than  does  the  man  who  is  selling.  No 
longer  does  the  purchasing  agent  take  the  sales- 
man's word  for  his  wares.  His  knowledge  of  price, 
processes  of  manufacture  and  ultimate  use  of  the 
materials  for  which  he  is  in  the  market  has  reduced 
sales  effort  to  a  minimum.  Selling  concerns  are 
more  and  more  realizing  that  the  new  purchasing 
executive  knows  what  he  wants  and  why  he  wants  it, 
and  that  no  amount  of  personal  magnetism  or  en- 
tertaining ability  on  the  part  of  the  salesman  can 
persuade  him  that  he  wants  something  else.  To 
meet  this  specialized  knowledge  and  determination 
to  decide  for  himself  just  what  he  will  or  will  not 
buy  has  brought  into  the  selling  field  an  entirely 
new  type  of  salesman  who  knows  the  buyer's  tech- 
nical needs  better  than  he  knows  the  mere  "selling 
talk"  about  the  commodity  he  is  selling.  He 
stresses  the  more  intangible  value  broadly  covered 
under  the  name  "  service, "  which  now  looms  up  as 
one  of  the  great  essentials  in  the  satisfactory  ac- 
complishment of  a  purchase.  While  it  is  certain 
that  the  overstressing  of  service  to  the  neglect  of 
more  tangible  values  will  never  meet  with  favor  in 


SALES  SOLICITATION  39 

the  eyes  of  the  purchasing  executives,  the  element 
of  service  is  permanent  in  its  modern-day  impor- 
tance. 

The  present-day  purchasing  executive  looks  upon 
the  salesman  more  in  the  light  of  a  consultant  and 
a  source  of  information.  Knowing  a  great  deal 
about  the  material  he  wishes  to  buy,  he  demands 
an  even  greater  detailed  knowledge  on  the  part  of 
the  salesman.  Sitting  at  his  desk  and  interview- 
ing one  salesman  after  another  with  a  completeness 
and  a  celerity  that  would  not  have  been  deemed 
possible  even  five  years  ago,  he  adds  constantly  to 
his  large  fund  of  facts  pertaining,  not  only  to  the 
materials  in  which  he  is  directly  interested,  but 
to  all  materials  sold  by  the  concern  represented. 
No  longer  is  buying  a  leisurely  process  of  obtaining 
goods  at  a  low  price,  but  a  scientific  system  of 
securing  quality,  service,  delivery  and  a  fair  price. 

Reasons  for  Former  111- Will  between  Seller  and 
Buyer. — The  artificial  friendship  which,  twenty-five 
years  ago,  existed  between  buyer  and  seller  has  been 
gradually  eliminated  by  the  advent  of  the  modern 
purchasing  agent.  For  perhaps  ten  years  the  spirit 
with  which  the  salesman  regarded  the  purchasing 
agent  was  one  of  inward  resentment,  but  outward 
friendship.  He  could  no  longer  wheedle  an  order 
by  means  of  friendship  and,  in  many  instances,  at 
least,  He  could  not  obtain  an  order  on  the  grounds 
of  the  merits  of  his  particular  articles  for  sale.  He 
was  face  to  face  with  a  problem  that  he  could  not, 
or  would  not,  solve.  And  so  he  ceased  trying  to 


40        THE  SCIENCE  OF  PURCHASING 

do  business  with  the  purchasing  agent  and  tried 
harder  than  ever  to  reach  the  man  " higher-up." 

This  was  largely  the  fault  of  the  purchasing  agent 
himself,  but  the  reluctance  of  the  business  managers 
and  executives  of  the  concern  employing  him  to  in- 
clude real  authority  in  the  bestowing  of  the  title  had 
a  great  deal  to  do  with  it.  The  purchasing  agent, 
realizing  that  he  was  unimportant,  attempted  to  as- 
sume an  importance  that  he  did  not  feel.  He  was 
arrogant.  He  formed  the  habit  of  looking  upon  all 
salesmen  with  active  dislike.  Having  found  that 
buying  through  friendship  was  no  longer  "done" 
he  went  to  the  opposite  extreme  and  refused  to  be 
civil  to  the  salesmen. 

Not  always  sure  of  what  he  wanted,  the  purchas- 
ing executive  pretended  to  know  precisely,  and, 
without  giving  the  salesman  a  hearing,  he  assumed 
that  the  vender  represented  did  not  have  it. 
Anxious  to  impress  the  men  calling  on  him  with 
his  imagined  importance,  he  forced  them  to  wait 
long  hours  in  the  anteroom  and  often  sent  word 
at  the  last  moment  that  he  would  be  unable  to  see 
those  who  had  wasted  valuable  time  outside  his 
door.  It  became  the  custom  to  adopt  calling  hours 
and  to  refuse  to  see  salesmen  excepting  between 
certain  hours,  no  matter  how  urgent  the  matter 
might  be.  When  an  interview  was  accorded  the 
purchasing  agent  was  cold,  disinterested  and  un- 
responsive except  in  the  matter  of  price,  which 
must  be  excessively  low.  He  understood  his  job  to 
be  exclusively  that  of  saving  money  for  his  concern 


SALES  SOLICITATION  41 

and,  with  this  ever  before  him,  he  refused  to  listen 
to  anything  the  salesman  might  have  to  tell  him, 
unless  it  dealt  with  price.  He  resorted  to  all 
sorts  of  expedients  in  order  to  force  the  salesman 
to  lower  his  estimate,  and  some  of  these  so- 
called  "expedients"  were  patently  "sharp  prac- 
tices. " 

Gradual  Change  in  Attitude.— On  the  whole,  the 
salesman  could  not  be  blamed  for  resenting  the  pres- 
ence of  a  man  who,  though  no  longer  the  old-time 
buyer,  had  not  developed  into  a  modern  purchasing 
agent,  even  though  he  bore  the  title  of  such.  Under 
the  circumstances  it  was  to  be  expected  that  he 
would  go  "  higher-up  "  whenever  possible.  He  had 
little  opportunity  to  exert  his  selling  ability  and 
little  hope  of  a  sale  when  dealing  with  the  purchas- 
ing agent  of  ten  years  ago. 

It  is  the  general  consensus  of  opinion  that  the 
war  has  done  much  toward  changing  the  attitude  of 
the  salesman  toward  the  purchasing  agent  and  also 
that  executive's  attitude  toward  the  salesman.  The 
spirit  to-day  is  one  of  greater  cooperation,  of  mutual 
respect  and  confidence,  and  reciprocity  of  commer- 
cial courtesy.  This  is  the  natural  consequence  of 
the  dispelling  of  arrogance,  suspicion  and  lack  of 
foresight  on  the  part  of  the  purchase-director,  and 
the  new  attitude  has  openecl  the  eyes  of  the  salesmen 
to  the  possibilities  of  business  transacted  with  men 
who  have  specialized  in  buying,  just  as  the  salesman 
has  specialized  in  the  art  of  selling. 

During  the  hard  years  of  the  war  when  the  pur- 


42       THE  SCIENCE  OF  PURCHASING 

chase-director  floundered  in  the  sellers'  market,  he 
learned  much  concerning  the  value  of  courtesy,  tact 
and  fair  dealing.  In  his,  often  unsuccessful,  at- 
tempts to  secure  materials  with  which  to  keep  his 
factories  running,  he  found  himself  accorded  some- 
what the  same  treatment  he  had  accorded  others, 
and  he  learned  almost  over  night  the  lesson  which, 
under  the  pre-war  conditions,  it  would  have  taken  at 
least  five  years  to  teach  him.  To-day  the  purchas- 
ing executive  is  taking  his  profession  seriously  and 
his  one  desire  is  to  meet  the  salesman  halfway. 
This  change  has  been  recognized  by  salesmen,  and 
the  result  is  a  constructive  cooperation  that  works 
to  the  advantage  of  every  one  concerned  in  the  busi- 
ness of  buying  and  selling. 

Sizing  up  the  Purchasing  Executive. — The  mod- 
ern salesman  is  trained  in  the  analysis  of  men.  He 
studies  the  physical  appearance,  facial  expressions, 
manner  of  speech,  actions,  etc.,  of  his  prospect  and 
makes  his  sales  attack  in  the  manner  best  cal- 
culated to  appeal  to  the  particular  type  of  indi- 
vidual to  whom  he  desires  to  make  a  sale.  Having 
" sized  up"  his  prospect,  the  salesman  adjusts  his 
sales  talk  to  the  mental  speed  at  which  his  analysis 
tells  him  the  purchaser  is  most  likely  to  follow  him. 
He  watches  carefully  each  change  in  expression, 
each  little  action,  for  the  effect  of  his  talk.  He 
knows  the  authentic  psychological  fact  that  every 
idea  is  accompanied  by  an  emotion — that  is,  a  feel- 
ing for  or  against,  or  a  neutral  f eeling. 

Through  analysis,  the  salesman  knows  whether  to 


SALES  SOLICITATION  43 

appeal  to  the  prospect  by  data,  facts  and  reason,  or 
by  generalization  of  merits  and  by  emphasizing  the 
policies  of  his  house.  He  recognizes  at  once  the 
technical-minded  man,  the  imaginative,  the  emo- 
tional, the  analytical,  the  calculating  type,  etc. 
By  careful  attention  to  the  conversation  of 
the  purchaser  he  may  find  out  that  a  competi- 
tor or  a  seller  in  another  line  has  failed  to  make 
shipment  as  per  specification  and  he  promptly 
lays  stress  upon  the  service  rendered  by  his  own 
firm. 

It  is  no  longer  the  general  practice  of  reputable 
salesmen  to  ferret  out  the  particular  hobby  of  the 
purchaser  and  to  join  him  in  riding  it.  But  a 
sufficient  number  of  selling  concerns  countenance, 
or  at  least  wink  at,  this  practice  to  make  it  advisable 
for  the  purchaser  to  look  out  for  this  method  of 
selling. 

The  purchasing  executive  is  the  object  of  highly 
concentrated  effort,  it  must  be  remembered.  The 
trained  salesman  approaches  his  prospect  with  a 
single-minded  purpose  to  sell  his  merchandise.  He 
is  in  a  position  of  advantage  over  the  harassed  pur- 
chaser whose/days  are  spent  in  interviewing,  one 
after  the  otper,  men  who  each  have  but  one  idea. 
The  purchaser  must  divide  his  attention  between 
many  different  articles  while  at  the  same  time  con- 
centrating for  the  moment  upon  the  article  before 
him.  It  becomes  most  important,  then,  that  the  pur- 
chasing executive  know  the  technic  of  "  sales  ap- 
proach" and  " prospect  analysis." 


44        THE  SCIENCE  OF  PURCHASING 

Personal  Analysis  of  Physical  Appearances.— The 
business  of  purchasing,  in  consequence,  requires  a 
strong  and  sophisticated  will  power  to  resist  the 
trained  blandishments  of  the  enthusiastic  salesman, 
and  to  grasp  the  mode  of  the  salesman's  "size  up" 
and  plan  of  operation.  He  needs,  himself,  to  know 
how  his  weak  or  vulnerable  spots  are  searched  out 
and  attacked,  and  how  to  meet  the  human  equation. 

Having  learned  all  that  he  can  about  the  needs 
of  his  iirm  and  the  articles  to  be  purchased  he  does 
very  well  to  study  himself  from  a  sales  viewpoint. 
It  is  valuable  to  him  actually  to  study  salesman- 
agement  and  salesmanship  and  keep  in  touch  with 
modern  knowledge  and  discussion  of  these  subjects. 

An  interesting  start  is,  perhaps,  an  analysis  of  his 
own  physical  and  temperamental  characteristics. 
There  is  a  certain  degree  of  knowledge  available  on 
the  subject.  For  example,  the  broad,  high,  square- 
shaped  forehead  indicates  analytical  power,  intel- 
ligence, perseverance,  and  severity.  The  more  it 
tends  toward  rounded  and  cornerless  outlines,  the 
more  flexibility  of  character  does  it  indicate.  The 
retreating  forehead  indicates  imagination,  feeling, 
wit  and  keen  perception.  The  projecting  forehead 
is  a  sign  of  weakness  of  will. 

The  eyes  indicate  the  feeling  rather  than  the  in- 
tellect, though  there  are  a  few  rules  that  are  more 
or  less  reliable. 

The  chin  and  lips  are  watched  not  only  for  con- 
struction but  also  for  expression.  Thin  lips  usually 
indicate  industry  and  order,  etc.  If  the  lips  are 


SALES  SOLICITATION  45 

drawn  down  at  the  corners  they  show  a  weak  or 
pessimistic  disposition.  Large,  well-defined  lips 
show  energy  and  vitality.  Lips,  however  large,  if 
well-formed  and  well-closed,  indicate  power,  ability, 
energy  and  good  sense. 

These  " appearance  indicators"  have  been  found 
fairly  reliable  by  salesmen  and  executives  who  have 
analyzed  the  subject,  but  good  logic  is  necessary  in 
making  deductions,  since  there  are  exceptions  to  all 
rules. 

Personal  Analysis  of  Speech. — It  has  been  said 
that  any  man  who  talks  500  words  to  a  good  sales- 
man will  get  himself  accurately  tagged.  It  is  gen- 
erally conceded  that  what  a  man  says  is  by  far  the 
best  way  to  analyze  him,  and  for  this  reason  the 
wise  purchasing  executive  will  guard  against  talking 
too  much.  From  his  manner  of  speech,  the  sales- 
man is  finding  out  the  speed  of  his  thought,  his 
method  of  thinking  and  his  type  of  mind.  If  he 
asks  many  questions  the  salesman  decides  that  he  is 
analytical  and  presents  his  proposition  in  an  analyt- 
ical manner.  If  he  does  not  ask  questions,  but 
waits  until  the  salesman  has  finished  his  talk,  he  is 
ticketed  as  being  less  interested  in  the  details  than 
in  the  proposition  as  a  whole. 

By  what  the  purchasing  executive  says,  the  sales- 
man gains  a  knowledge  of  unfortunate  purchases, 
accidents  occurring  to  orders  in  transit,  delayed 
shipments,  etc.,  and  adjusts  his  sales  talk  to  fit  the 
expedient.  By  the  manner  in  which  the  purchasing 
executive  addresses  him,  by  the  tone  of  his  voice  and 


46        THE  SCIENCE  OF  PUECHASING 

the  selection  of  words,  the  salesman  knows  at  once 
that  he  is  welcome  or  unwelcome.  His  impression 
of  that  first  greeting  will  remain  with  him  long 
after  he  has  forgotten  the  possible  order  received  at 
the  end  of  the  interview. 

Many  of  the  most  successful  men  of  business — J.  P. 
Morgan,  E.  H.  Harriman,  etc. — have  been  noted  for 
their  silence.  The  principle  of  analysis  through 
speech  has  long  been  recognized  and  systematically 
guarded  against.  The  astute  purchaser  does  not  al- 
low the  salesman  to  know  what  is  going  on  in  his 
mind  until  the  final  decision  has  been  reached.  In 
order  to  think  clearly  upon  the  information  fur- 
nished him  in  the  sales  talk  to  which  he  has  listened 
attentively,  the  purchasing  executive  does  not  wish 
to  be  bombarded  with  more  and  more  words  upon 
the  subject.  He  wishes  to  digest  the  data  already 
received  and  to  come  to  his  decision  without  inter- 
ruption. It  is,  therefore,  often  a  fact  that  a  sales- 
man "  talks  a  man  out  of  an  order. " 

Personal  Analysis  of  Actions. — The  normal  type 
of  purchasing  executive  understands  that  he  must 
give  so  much  time  each  day  to  the  interviewing  of 
salesmen.  He  listens  attentively  to  what  is  being 
said  and  listens  without  committing  himself.  He 
gives  the  salesman  to  understand  that  he  is  suffici- 
ently interested  in  his  sales  talk  to  give  his  undi- 
vided attention,  but  is  not  to  be  rushed  into  placing 
an  order.  By  his  actions  he  puts  the  salesman  at 
his  ease  without  being  overf  riendly.  He  should  not 
allow  himself  to  betray  the  fact  that  he  is  bored 


SALES  SOLICITATION  47 

by  too  frequent  interviews,  even  though  he  is  men- 
tally fagged  by  the  constant  effort  called  forth.  He 
should  not  allow  suspicion  to  creep  into  his  attitude, 
no  matter  what  grounds  he  may  have  for  suspecting 
the  salesman  of  overstating  or  understating.  He 
should  never  pretend  to  be  busy.  Prom  the  pur- 
chasing point  of  view  this  is  not  a  fair  stand  to 
take.  If  for  any  reason  it  is  not  convenient  to  see 
the  salesman  it  is  far  better  to  say  so,  giving  the 
reason  if  possible,  than  to  see  him  and  listen  with 
only  half  attention. 

By  the  purchasing  executive's  actions,  the  flutter- 
ing of  his  hands,  the  shifting  of  his  feet  and  the 
roving  of  his  eyes,  the  salesman  is  quick  to  see  a 
lack  of  interest  or  a  fluctuation  of  the  attention  and 
will  at  once  change  his  tactics  in  order  to  recapture 
the  attention  or  to  distract  his  mind  from  the  thing 
that  has  occupied  him  for  a  moment. 

The  action  of  the  eyebrows  is  a  very  important 
symptom  to  watch  in  the  opinion  of  the  salesman. 
Raised  eyebrows  show  surprised  attention  and 
sometimes  doubt.  Lowered  eyebrows  show  an  an- 
tagonistic attitude. 

The  purchasing  executive  should  maintain  a  con- 
stant watch  over  his  every  movement  and  expres- 
sion, else  his  policy  of  concentrated  attention  plus 
science  will  lose  half  its  "  punch, "  and  the  salesman 
will  know  almost  as  much  about  his  final  decision 
as  does  the  purchaser  himself. 

Personal  Analysis  of  Surroundings, — The  sur- 
roundings of  a  man  speak,  perhaps,  more  than  hia 


48        THE  SCIENCE  OF  PURCHASING 

person.  An  office  that  is  clean  and  up-to-date  will 
impress  the  caller  with  the  energetic,  highly  efficient 
personality  of  the  purchasing  executive.  A  desk 
that  is  free  from  papers  and  catalogues  is  pleasing 
to  the  salesman,  because  there  are  no  unpleasant 
tag-ends  of  unfinished  business  to  distract  the  pros- 
pective purchaser's  attention  from  the  sales  talk. 
Prom  the  purchaser's  point  of  view  a  clear  desk  is 
advantageous  for  the  same  reason.  Odds  and  ends 
within  the  view  of  the  salesman  often  cause  irrele- 
vant conversation  that  takes  time  and  gets  nowhere. 
A  clean  desk  has  a  bracing  effect  upon  the  salesman 
and,  indicative  as  it  is  of  the  energetic,  efficient,  pur- 
chasing executive,  is  almost  sure  to  bring  him  to  the 
point  quickly  and  without  preamble. 

The  man  whose  office  is  not  up-to-date,  and  whose 
desk  is  cluttered  with  all  manner  of  papers,  booklets 
and  samples,  is  sure  to  be  tagged  as  lacking  in  abil- 
ity, or,  worse,  in  progressive  alertness.    The  type  of 
man  who  can  work  day  after  day,  surrounded  by  dis- 
order, is  usually  very  hard  to  sell,  but  once  sold  will 
continue  to  buy  that  particular  " line"  through  habit. 
Very  often  he  is  put  down  by  salesmen  as  unreliable, 
inefficient  and  "old-fogyish."'    Used  as  he  is  to 
the  constant  array  of  odds  and  ends  always  before 
his  eyes,  he  cannot  expect  to  give  his  undivided  at- 
tention to  the  salesman,  and  the  effect  is  either  loss 
of  interest  in  the  sale  on  the  part  of  the  salesman  or 
a  subtle  attack  with  renewed  energy. 

The  ideal  office  surroundings  for  the  modern  pur- 
chasing executive,  to  whom  time  is  of  vital  impor- 


SALES  SOLICITATION  49 

tance,  consists  of  a  flat-topped  desk,  free  from  orna- 
mentation or  confused  disarray.  The  chairs  pro- 
vided for  callers  should  not  be  too  comfortable  and 
should  face  the  light  while  the  purchasing  executive 
keeps  his  face  in  the  shadow.  Bookcases,  file-cases, 
etc.,  complete  the  furnishing  of  the  purchasing  ex- 
ecutive's official  workshop.  Simplicity,  utility  and 
order  should  be  the  key. 

The  Purchasing  Executive's  Analysis  of  the 
Salesman. — The  purchasing  executive,  being  in  the 
position  of  the  aggressor,  is  privileged  to  demand 
information,  while  it  is  the  business  of  the  salesman 
to  furnish  the  desired  data.  It  is  even  easier,  there- 
fore, for  the  purchaser  to  study  the  salesman  than 
for  the  salesman  to  study  the  purchaser.  The  same 
appearance  indicators  used  by  the  salesman  may  be 
adopted  by  the  purchasing  executive  and  to  them 
ma^T  be  added : 

The  business  card. 

The  hand  clasp. 

Manner  of  approach. 

Method  of  presentation. 

Attitude  toward  defeat. 

The  business  card  often  tells  the  purchasing  ex- 
ecutive much  about  the  firm  represented  by  the 
salesman,  especially  if  the  card  is  so  covered  by 
cheap  advertising  as  to  hide  the  name  of  the  sales- 
man. This  type  of  card  is  usually  presented  by  an 
inexperienced  or  mediocre  salesman,  who  depends 
upon  the  advertisement  of  his  merchandise  rather 
than  upon  his  own  ability  as  a  salesman.  Very 


50        THE  SCIENCE  OF  PURCHASING 

often  the  firm  sending  out  such  a  man  with  such 
a  card  is  unreliable  and  unsound  in  its  policies. 
The  advertising  business  card  may  impress  certain 
types  of  buyers  favorably,  but  the  modern  purchas- 
ing executive  prefers  to  listen  to  the  salesman 
rather  than  to  read  the  advertising  on  his  card. 

On  the  other  hand,  a  neatly  printed  or  engraved 
card,  bearing  only  the  name  of  the  salesman  and  no 
hint  as  to  his  business,  is  very  likely  to  arouse  the 
antagonism  of  the  purchasing  executive  and  his 
first  impression  will  no  doubt  color  his  interview. 
Receiving  the  unidentified  name  of  the  salesman  will 
always  bring  up  the  questions:  What  does  he 
want!  Who  does  he  represent?  What  is  he  sell- 
ing? What  is  the  matter  with  his  firm?  Is  he 
ashamed  of  his  business,  etc.? 

The  ideal  business  card,  the  card  that  creates  the 
correct  impression  and  puts  the  purchasing  execu- 
tive in  a  receptive  mood,  is  the  card  that  gives 
clearly  and  concisely  the  name  of  the  salesman,  the 
name  of  his  firm  and  the  city  in  which  that  firm  is 
located.  When  possible  there  should  be  a  word 
or  short  phrase  telling  the  kind  of  merchandise  in 
which  the  salesman  wishes  to  interest  the  purchaser, 
such  as  fittings ;  paints ;  steam  shovels ;  office  equip- 
ment, etc. 

The  Handclasp. — Salesmen,  as  a  rule,  are  reluc- 
tant to  offer  to  shake  hands  with  the  purchasing  ex- 
ecutive as  they  have  learned,  through  experience, 
that  many  purchasers  dislike  the  practice.  It  is 
well,  however,  for  the  purchasing  director  to  offer 


SALES  SOLICITATION  51 

his  hand  to  the  salesman.  This  gives  an  additional 
opportunity  for  judging  the  type  of  man  with  whom 
he  is  about  to  talk.  The  cordial  handclasp  has  the 
supplementary  advantage  of  putting  the  caller  at 
his  ease  and  of  paving  the  way  for  the  friendly  re- 
lations necessary  to  the  modern  cooperation  between 
salesmen  and  purchasing  executives.  There  is,  of 
course,  much  overconscious  technic  given  to  a 
handclasp,  ranging  from  stiff  formality  to  exag- 
gerated friendliness.  An  easy,  simple,  and  natural 
manner  in  this  respect  is  preferable. 

Manner  of  Approach. — It  is  often  said  that  the 
" approach  is  everything."  In  purchasing,  as  in 
selling,  this  saying  is  decidedly  applicable.  The 
purchasing  executive  goes  to  his  desk  each  day 
with  the  understanding  that,  in  all  probability,  he 
will  be  called  upon  to  meet  a  dozen  or  twenty  dif- 
ferent types  of  salesmen,  each  with  his  particular 
manner  of  entering  the  office  and  greeting  the  "pros- 
pect." It  requires  a  levelheaded,  well-poised  man, 
indeed,  to  meet  these  salesmen,  many  of  whom  will 
affect  him  unpleasantly,  with  invariable  courtesy. 
Of  the  pleasing  types  nothing  needs  to  be  said. 
But  during  the  day  the  purchasing  executive  may 
encounter  one  or  all  of  the  following  unpleasing 
types: 

1.  The  blusterer,  who  tries  to  rush  an  order 
either  by  hinting  at  a  rise  in  the  market  or  by 
offering  a  special  price  concession  if  his  prop- 
osition is  accepted  at  once. 


52        THE  SCIENCE  OF  PURCHASING 

2.  The  preoccupied  youth,  who  conveys  the  im- 
pression that  he  is  a  salesman  as  a  side  issue, 
his  real  interest  being  in  baseball,  golf,  danc- 
ing, etc. 

3.  The  frightened  or  hesitant  type,  who  may  be 
''green"  material  or  may  have  encountered  a 
"grouchy"  purchasing  executive  or  two.    Or 
he  may  be  timid  by  nature,  a  square  plug  in  a 
round  hole. 

4.  The  too  friendly  salesman,  who  gives  informa- 
tion in  the  manner  of  one  conferring  a  special 
favor. 

5.  The  arrogant  type,  who  condescends  to  tell  the 
purchaser  something  about  the  goods  he  wishes 
to  sell  and  appears  to  be  appalled  at  the  gross 
ignorance  of  purchasing  executives  in  general. 

Each  type  of  salesman  calls  forth  a  different  emo- 
tion in  the  long-suffering,  but  ever  patient,  purchas- 
ing executive,  whose  duty  it  is  to  maintain  an  even 
temper,  tolerance  and  a  tranquil  mind. 

Ideal  Salesman  from  the  Salesmanager's  Point 
of  View. — There  are  a  certain  group  of  qualities 
that  go  to  make  up  the  ideal  salesman  from  the  sales 
manager's  point  of  view.  Listed  they  appear 
briefly  as: 

1.  Stamina  (unwillingness  or  inability  to  acknowl- 
edge or  even  recognize  defeat). 

2.  Persuasive    force     (physical    magnetism    or 
patient  facility  in  affecting  the  ideas  and  opin- 
ions of  others). 


SALES  SOLICITATION  53 

3.  Quickness  and  adaptability  (readiness  to  ad- 
just himself  to  his  surroundings  and  to  differ- 
ent temperaments). 

4.  Alertness  and  perception  (readiness  to  absorb 
information,  intelligent  grasp  of  a  situation). 

5.  Unusual  energy  and  ambition  to  succeed. 
According  to  the  salesmanager,  any  man  with  a 

fair  share  of  the  above  qualities  can  sell  goods,  at 
least  some  kinds  of  goods,  and  in  some  territories. 
The.men  are  selected  with  a  view  to  the  type  of  men 
to  whom  they  will  sell.  The  measure  of  the  type 
of  mind  the  salesman  is  going  to  encounter  is 
judged  mainly  by  the  average  amount  per  sale. 

From  the  point  of  view  of  the  purchasing  execu- 
tive the  qualities  that  go  to  make  up  the  ideal  sales- 
man are  somewhat  different  from  those  selected  by 
the  salesmaaager.  He  prefers  the  alert,  wide- 
awake type  of  man,  who  can  state  his  proposition 
concisely  and  without  preamble;  whose  persuasive 
force  is  not  noticeably  prominent;  whose  readiness 
to  absorb  information  is  in  direct  ratio  to  his  ability 
to  impart  information;  and  whose  adaptability 
serves  only  as  a  stimulus  to  quick  action. 

Perhaps  the  quality  of  stamina  or  persistence  is 
the  one  most  undesirable  from  the  viewpoint  of  the 
purchasing  executive.  Having  weighed  the  matter 
of  placing  his  order  with  a  certain  salesman  and 
having  decided,  for  reasons  best  known  to  himself, 
to  place  the  order  elsewhere,  the  purchasing  execu- 
tive does  not  wish  to  be  hounded  by  the  salesman 
who  is  unwilling  or  unable  to  acknowledge,  or  even 


54       THE  SCIENCE  OF  PURCHASING 

to  recognize,  defeat.  He  is  very  likely  to  put  that 
type  of  salesman  down  as  a  nuisance  and  to  avoid 
dealing  with  him,  or  the  firm  he  represents,  in  the 
future.  The  purchasing  executive  who  is  busy,  who 
knows  his  firm,  his  requirements,  etc.,  will  not  look 
kindly  upon  the  firm  that  employs  the  overinsistent 
type  of  salesman  who  tries  to  tell  him  again  and 
again  what  he  wants  and  why  he  wants  it.  Persist- 
ence in  looking  after  the  order  after  it  is  placed 
is  all  very  well  and  pleasing  to  all  purchasing  ex- 
ecutives, but  persistence  that  needlessly  takes  up 
the  time  of  the  purchaser  is  annoying  and  tends  to 
lessen  the  cordial  relations  existing  between  the  pur- 
chaser and  his  corps  of  salesmen. 

Building  Up  a  Sales  Defense.— Having  analyzed 
himself  from  the  salesman's  viewpoint,  and  being 
cognizant  of  the  characteristics  within  himself  that 
makes  for  the  too  successful  sales  attack,  the  pur- 
chasing executive  knows  where  to  begin  in  building 
up  a  sales  defense.  Broadly  speaking,  the  points 
that  would  impress  the  salesman  at  first  glance  are : 
Dignity  Courtesy 

Tact  Efficiency 

Energy  Judgment 

Openmindedness 

All  of  these  qualifications  are  present  in  some  de- 
gree in  every  successful  business  man,  but  often 
they  are  negated,  upon  first  meeting,  by  preoccupa- 
tion, nervous  mannerisms,  etc. 

The  dignity  of  the  purchasing  executive's  mien 
should  be  such  that  the  salesman  will  see  at  once  the 


SALES  SOLICITATION  55 

necessity  of  stating  his  proposition  honestly,  con- 
cisely, and  of  giving  his  best  price  first.  No  pur- 
chasing executive  should  humiliate  himself  by  enter- 
ing into  " price  beating"  discussions. 

His  manner  should  be  neither  too  friendly  nor  too 
frigid;  neither  suspicious  nor  gullible;  gracious  but 
not  necessarily  affable ;  and  courteous,  always.  Too 
much  stress  cannot  be  put  upon  the  importance  of 
courtesy  in  business  relations.  A  courteous  dismis- 
sal will  often  leave  a  better  impression  with  the 
salesman  than  a  large  order  for  goods  gruffly  or  un- 
graciously given. 

Tact  has  been  defined  by  Webster  as  "ready 
power  of  appreciating  and  doing  what  is  required  by 
the  circumstances;  nice  perceptions;  peculiar  skill 
or  faculties. ' '  Having  tact,  the  alert  purchasing  ex- 
ecutive may  be  sure  of  controlling  any  situation  that 
may  arise.  Without  the  aid  of  this  quality,  knowl- 
edge, ability  and  training  are  practically  useless  to 
him.  Tact  may  be  innate  or  acquired,  but  it  must 
be  present  in  large  quantities  for  the  successful 
transaction  of  business,  the  cordial  relationship  be- 
tween men,  and  the  cooperation  between  buyer  and 
seller. 

The  impression  of  energy  may  be  created  by  any 
one  or  all  of  a  great  many  indicators.  The  truly 
energetic  man  would  have  difficulty  in  concealing 
that  quality  from  the  salesman  or  from  any  other 
man  he  might  meet.  Energy  is  inherent  power, 
high-pressure  perception  and  dynamic  force.  The 
man  of  energy  impresses  the  salesman  at  once  with 


56        THE  SCIENCE  OF  PURCHASING 

his  mental  activity,  his  capability  and  his  incisive 
vigor.  His  facial  expressions,  manner  of  speech, 
method  of  thought,  surroundings,  etc.,  all  tell  the 
story  of  energy.  The  salesman,  recognizing  this 
quality  in  the  man  with  whom  he  has  to  deal,  will 
waste  no  time  in  idle  talk.  He  will  come  straight  to 
the  point  in  a  manner  designed  to  gain  and  hold  the 
attention  of  his  prospect. 

But  the  prime  timesaver  for  the  busy  purchasing 
executive  is  the  creation  of  an  atmosphere  of  effici- 
ency. Quick  action,  the  elimination  of  lost  motion, 
is  the  aim  of  every  modern  purchasing  executive, 
and  a  desk  that  shows  no  tagends  of  yesterday's 
business,  no  forerunner  of  to-morrow's  activities, 
is  quite  the  most  important  factor  in  impressing  the 
efficiency  of  the  purchaser  upon  the  mind  of  the 
salesman.  This  appearance  of  businesslike  effi- 
ciency should  be  created  without  the  pretense  of 
being  busy.  As  a  rule,  a  purchasing  executive  who 
allows  the  salesman  to  see  that  he  is  rushed  does  not 
get  the  best  that  the  salesman  has  to  give.  Better 
by  far  to  pretend  that  he  is  not  busy,  thus  present- 
ing a  calm  exterior  to  the  caller,  thus  putting  him 
at  his  ease  and  giving  him  the  oportunity  to  choose 
his  words  and  present  his  proposition  in  his  own 
way. 

Solidity  of  judgment  is  too  often  absent  in  the 
specialist  of  any  calling.  Yet  of  all  the  qualifica- 
tions desirable  in  business  relations  that  of  fine 
discrimination  and  reasonable  conclusion  is  most  es- 
sential. The  trained  salesman  is  quick  to  see  the 
lack  of  acumen  in  the  purchasing  executive  and  to 


SALES  SOLICITATION  57 

make  his  sales  attack  according  to  Ms  prospect's 
thinking  principles.  One  of  the  greatest  assets  of 
a  purchasing  executive  is  the  ability  to  weigh  care- 
fully and  reasonably  all  facts  set  before  him  and  to 
differentiate  between  those  that  are  important  and 
those  that  are  not;  to  estimate  the  value  of  the 
article  under  discussion,  and  to  arrive  at  a  conclu- 
sion without  loss  of  time  or  perceptible  hesitation. 
For  successful  purchasing,  facility  in  judging  is  of 
vital  necessity  both  in  relation  to  the  purchasing 
executive's  firm  and  in  regard  to  the  impression 
made  upon  the  salesman  who  calls  upon  him. 

It  is  essential  that  the  purchasing  executive  main- 
tain a  neutral  attitude  toward  all  salesmen  and  their 
propositions.  A  disposition  toward  fairness,  a  wish 
to  «how  impartiality,  will  go  far  in  establishing  the 
desired  cordial  relations  between  buyer  and  seller. 
In  order  to  create  the  impression  of  open-minded- 
ness  the  purchasing  executive  must  be  open-minded. 
He  must  possess  understanding,  not  only  of  his 
firm's  needs  and  the  materials  under  discussion  but 
of  the  aims  and  ambitions  of  the  salesman  and  his 
house.  He  must  be  reasonable.  He  must  listen  to 
the  argument  of  each  salesman  in  turn  and  estimate 
each  statement  in  relation  to  what  is  right  in  itself 
according  to  conditions  that  obtain.  Under  no  cir- 
cumstances should  he  close  his  mind  to  the  facts 
that  are  being  presented.  No  matter  what  personal 
or  business  grounds  he  may  have  for  jumping  at 
a  conclusion,  it  is  most  important  that  he  delay  his 
decision  until  all  the  data  available  are  before  him. 


58        THE  SCIENCE  OF  PURCHASING 

Open-mindedness  is  vital  to  progress.  To  close  the 
mind  against  growth  is  to  invite  mental  stagnation. 

The  building  up  of  a  sales  defense  consists  in 
presenting  to  the  caller  an  exterior  calculated  to 
conceal  the  weak  spots  for  which  the  salesman  is 
looking  in  order  to  secure  that  specialist's  best  prop- 
osition in  the  shortest  possible  time. 

Desirable  Impression  to  Leave  with  the  Depart- 
ing Salesman. — The  best  single  asset  of  the  pur- 
chasing executive  is  a  staff  of  friendly  and  cordial 
salesmen  who  like  him  both  for  himself  and  for  the 
business  he  gives  them.  Cooperation  is  the  slogan 
of  modern  merchandising,  and  cooperation  is  impos- 
sible without  cordial  relationship.  The  contact  be- 
tween the  buyer  and  the  seller  is  not  potent  in  the 
same  way  that  it  once  was,  but  under  the  new 
regime,  friendship  has  taken  on  a  different  mean- 
ing, together  with  an  even  greater  importance 
than  formerly.  A  purchasing  executive,  whose 
relations  with  salesmen  are  right,  frequently 
secures  decided  advantages  and  favors  for  his 
firm. 

The  modern  purchasing  executive,  realizing  the 
value  of  the  salesman  as  a  bureau  of  information 
and  as  a  staff  assistant,  in  a  sense,  strives  to  make 
each  salesman  like  him  personally.  His  desire  is  to 
meet  the  salesman  on  the  same  basis  that  he  would 
meet  any  other  group  of  men,  not  as  buyer  and 
seller,  but  as  man  to  man.  He  wishes  the  salesman 
to  see  the  best  there  is  in  him  while  in  his  office,  and 
to  go  away  with  the  feeling  of  having  met  a  man 


SALES  SOLICITATION  59 

with  whom  he  enjoyed  the  contact  even  though  his 
call  netted  him  nothing. 

Should  There  Be  Specified  Calling  Hours?— The 
question  of  whether  or  not  the  purchasing  executive 
is  justified  in  establishing  calling  hours,  or  in  con- 
tinuing the  enforcement  of  those  established  in  years 
gone  by,  is  one  that  has  been  much  discussed  both 
among  purchasing  agents  themselves  and  among 
salesmen  upon  whom  the  restricted  hours  react  un- 
fairly. 

Clearly,  the  limited  day  is  a  great  help  to  the  busy 
purchasing  executive  in  the  transaction  of  his  busi- 
ness. By  setting  aside  certain  hours  during  which  he 
is  not  to  be  disturbed  save  in  an  emergency,  he  is 
able  to  keep  his  desk  fairly  free  from  accumulated 
mail,  etc. ;  to  analyze  the  data  which  are  so  important 
a  part  of  his  mental  equipment ;  to  confer  with  de- 
partment heads,  etc.  In  the  event  that  the  pur- 
chasing executive  is  surrounded  by  a  corps  of 
specialists  in  different  materials,  it  is  perhaps 
practical  for  the  real  head  of  the  purchasing  de- 
partment to  shorten  his  hours  of  receiving  salesmen. 
A  representative  of  a  lumber  concern  will  naturally 
want  to  talk  to  the  man  who  has  specialized  in  lum- 
ber before  he  talks  to  the  purchasing  executive ;  a 
chemical  salesman  can  better  present  the  merits  of 
his  wares  to  a  chemist  than  to  a  man  who  knows 
little  or  nothing  of  chemicals,  etc.  If  these  special- 
ists are  a  part  of  the  purchasing  staff,  the  limit- 
ing of  hours  does  not  curtail  the  working  day  of  the 
salesman,  and  he  will  not  resent  the  fact  that  he 


60        THE  SCIENCE  OF  PURCHASING 

could  not  see  the  purchasing  executive  in  person. 

The  Salesman's  Side  of  Calling  Hours. — The  gen- 
eral consensus  of  opinion  is  that  it  is  not  fair  to 
limit  the  salesman's  hours  of  work,  and  the  present- 
day  trend  of  thought  tends  to  eliminate  the  restric- 
tion. Even  those  purchasing  executives  who  cling 
to  the  practice  for  personal  reasons  have  caused 
the  rule  to  be  modified  in  such  a  way  that  it  does  not 
apply  rigidly,  especially  to  out-of-town  callers. 
The  salesman  who  has  traveled  many  miles  for  the 
purpose  of  seeing  a  certain  purchasing  executive 
is  not  going  to  be  put  off  by  a  reception  clerk  with 
the  information  that  he  must  wait  until  to-morrow 
without  a  feeling  of  resentment.  This  may,  and 
very  often  does,  result  in  strained  relations  between 
the  salesman  and  the  purchasing  executive.  In  case 
the  salesman  has  some  special  offer  to  make,  it  is 
entirely  possible  that  he  will  present  it  to  another 
firm  more  inclined  to  accord  the  salesman  a  wel- 
come. 

The  Compromise.— The  modern  tendency  toward 
cooperation  between  salesman  and  purchaser  has 
brought  about  a  desire  on  the  part  of  each  group 
to  see  reason  in  the  argument  of  the  other.  The 
salesman  is  willing  to  concede  that  there  is  some- 
thing more  to  the  job  of  purchasing  than  the  mere 
placing  of  an  order.  The  purchasing  executive  has 
come  to  understand  that  the  job  of  selling  neces- 
sarily encompasses  a  certain  amount  of  time  wasted, 
which,  for  the  salesman,  is  money  lost. 

One  director  of  purchases  for  a  large  manufactur- 


SALES  SOLICITATION  61 

ing  concern  maintained  hard-and-fast  rules  about 
receiving  salesmen  after  two  o'clock  in  the  after- 
noon. Three  years  ago  he  removed  the  barrier  be- 
tween himself  and  his  source  of  supply  and  thus 
saved  thousands  of  dollars,  the  greater  part  of 
which,  he  says,  was  accomplished  after  2  P.M. 
The  saving  came  through  "market  tips"  that  would 
not  have  been  offered  had  the  salesmen  felt  resent- 
ful toward  this  purchasing  executive,  and  through 
special  offers  that  would  have  been  presented  else- 
where had  he  not  made  it  a  point  to  receive  these 
salesmen  at  any  hour  they  chose  to  call. 

Another  purchasing  executive  caused  to  be  printed 
on  his  letterhead,  an  invitation  for  salesmen  to  call 
upon  him  before  noon  whenever  possible.  In  this 
invitation  he  gives  as  his  reason  for  the  request  the 
fact  that  after  noon  his  office  is  open  to  all  members 
of  his  organization  and  that  salesmen  are  frequently 
interrupted  in  presenting  their  propositions.  This 
same  purchasing  executive  has  instructed  his  re- 
ception clerk  to  find  out  what  each  salesman  has  to 
sell,  where  he  comes  from,  how  long  he  will  be  in 
town,  etc.,  and  to  communicate  these  data  to  him  be- 
fore she  admits,  or  refuses  to  admit  any  salesman. 
As  a  result,  this  purchaser  is  known  far  and  wide 
as  a  courteous,  fair-minded  man,  and  retains  the 
friendship  of  every  salesman  who  calls  upon  him, 
even  though  he  places  orders  with  only  a  limited 
number  of  firms. 


CHAPTER  VI 
SERVICE 

Service  a  Moot  Question.— From  all  quarters  of 
the  buying  and  selling  world  has  come  the  question 
of  what  constitutes  '  *  service. ' '  The  purchasing  ex- 
ecutive has  his  definition  of  the  word.  The  sales- 
manager  has  his  interpretation.  The  United  States 
Patent  officials  have  investigated  and  made  their  rul- 
ing. The  United  States  Bureau  of  Standards  has 
taken  up  the  question  of  standards  of  service.  Each 
group  of  men  has  rendered  its  version  of  the  word 
"  service "  and,  although  the  different  interpreta- 
tions are  in  a  manner  related,  no  two  groups  have 
transfused  the  sense  of  service  in  exactly  the  same 
way. 

It  appears  that  frequent  misunderstandings  have 
occurred  through  the  misconstruction  of  the  term 
"  service, "  and  that  much  of  the  annoyance  arising 
from  this  misconstruction  might  be  eliminated  by  a 
fusion  of  the  different  meanings  read  into  the  word. 
It  is  the  purpose  of  this  chapter  to  survey,  briefly, 
the  several  constructions  put  upon  the  word  "  ser- 
vice. " 

What  the  United  States  Patent  Officials  Rule.— 
The  attempt  of  a  bank  to  register  a  trade-mark 

62 


SEEVICE  63 

caused  the  United  States  Commissioner  of  Patents 
to  rule  that  ' 'service" — which  is  all  that  a  bank  or 
other  nonmanufacturing  institution  has  to  sell — 
"cannot  be  considered  a  commodity  in  trade,  nor  be 
entitled  to  the  privileges  or  prerequisites  that  attach 
to  tangible  goods,  such  as  trade-mark  protection." 
Through  the  investigation  preceding  this  ruling 
came  the  decision  that  service  is  not  entitled  to  be 
considered  on  a  plane  with  goods  that  can  be  marked 
or  tagged  or  analyzed  by  chemical  or  physical  tests, 
and  that  "an  intangible  interest  is  not  an  article  of 
merchandise. ' ' 

The  United  States  Patent  Office  contends,  how- 
ever, that  by  reason  of  its  use  in  advertising  and 
selling,  the  word  * '  service ' '  has  come  to  have  a  well- 
defined  meaning,  indicating  that  goods  so  labeled  or 
advertised  may  be  expected  to  give  good  service  to 
the  purchaser.  Broadly  speaking,  service  means  to 
the  United  States  Patent  officials  the  same  as  dur- 
ability or  quality. 

Service  According  to  the  United  States  Bureau  of 
Standards. — Quality,  performance  and  practice  con- 
stitutes all  there  is  or  can  be  to  service,  reasons  the 
United  States  Bureau  of  Standards  in  its  attempt  to 
establish  and  maintain  a  standard  of  performance 
and  of  practice  as  well  as  of  quality.  The  Federal 
experts  place  the  following  interpretation  upon  the 
respective  standards  of  quality,  performance  and 
practice : 

Standards  of  quality  are  fixed  by  those  specifica- 
tions for  material  which,  by  description  or  sample,  or 


64        THE  SCIENCE  OF  PURCHASING 

both,  fix  in  measurable  terms  a  property  or  group 
of  properties  which  should  be  possessed,  and  serves 
as  a  basis  on  which  materials  are  made,  sold  and 
tested. 

Standards  of  performance  are  fixed  by  those  speci- 
fications which,  in  case  of  machines  and  devices,  set 
the  requirements  of  operative  efficiency  or  action. 

Standards  of  practice  are  supposedly  based  upon 
standards  of  measurement,  quality  and  performance, 
and  encompass  the  technical  regulation  of  construc- 
tion, installation  and  operation. 

It  is  the  objective  of  the  United  States  Bureau  of 
Standards  to  clarify  the  understanding  of  service 
between  makers,  sellers,  buyers  and  users,  in  just 
the  proportion  that  standards  of  any  other  kind 
are  maintained. 

Service,  as  It  Appears  to  the  Modern  Salesman- 
ager. — The  modern  salesmanager,  having  analyzed 
the  public  mind,  advises  his  salesmen  to  devote  at 
least  one-third  of  their  sales  efforts  to  the  selling  of 
service.  Here  the  word  means : 

1.  Anticipating  the  customer's  wants  and  supply- 
ing those  wants. 

2.  Making  no  promises  that  cannot  be  fulfilled  and 
fulfilling  all  promises  that  are  made. 

3.  Providing  full  technical  details  of  the  article 
offered  in  order  that  the  purchaser  may  know 
exactly  what  he  is  getting. 

4.  Believing  the  purchaser  of  all  responsibility 
from  the  time  his  order  is  placed  until  his  goods 
are  delivered. 


SERVICE  65 

5.  Applying  the  psychology  of  "personal  atten- 
tion." 

This  last  mentioned  qualification  of  service  is,  in 
the  opinion  of  the  salesmanager,  by  far  the  most 
important.  It  does  not  mean  "friendship"  in  the 
old  sense  of  the  'term — the  modern  salesmanager  is 
no  more  anxious  to  return  to  the  former  "good- 
fellowship"  in  selling  than  is  the  modern  purchasing 
executive;  but  personal  attention  means  giving 
"scrupulous  care  to  the  customer's  slightest  need, 
to  the  peculiar  nature  of  the  business,  and  to  every- 
thing that  individually  makes  that  customer  differ- 
ent from  other  customers."  The  four  preceding 
qualifications  are,  in  most  cases,  covered  by  the 
policies  of  the  selling  concern,  and  the  salesman  is 
drilled  in  the  art  of  presenting  these  policies  in 
terms  of  service. 

The  Purchasing  Executive's  Idea  of  Service. — 
One  middle  western  firm  has  stated  its  definition  of 
service  as  "businesslike  methods  and  fair  dealing; 
delivering  the  goods  right  at  the  right  time;  extra- 
careful  inspection;  and  a  guaranty  that  guaran- 
tees." This  statement  as  nearly  defines  the  word 
according  to  the  purchasing  executive  as  it  is  pos- 
sible to  define  it. 

To  the  purchaser  the  word  "service"  is  second 
in  his  list  of  three  essentials  that  go  to  make  up  a 
satisfactory  transaction.  These  three  essentials  are 
QUALITY,  SERVICE,  and  PRICE.  To  him  service  is  not 
a  descriptive  word  modifying  the  article  pur- 
chased. It  does  not  mean  to  the  purchasing  ex- 


66        THE  SCIENCE  OF  PURCHASING 

ecutive,  that  goods  will  give  service  (will  wear), 
or  that  it  contains  the  property  or  properties  as  per 
description  or  sample,  or  that  it  fills  the  require- 
ments of  operative  efficiency  or  action. 

These  points  are  covered  by  the  first  of  the  pur- 
chasing executive's  three  essentials — quality.  To 
him  quality  describes  the  material  in  every  way 
that  material  may  be  described.  Service  applies  to 
the  selling  concern  rather  than  to  the  article  sold. 

But  service  does  not  mean  that  the  purchasing  ex- 
ecutive 's  wants  have  been  anticipated.  The  astute 
salesman  does  not  allow  his  customer  to  suspect 
that  his  wants  have  been  anticipated.  The  salesman 
assists  his  customer  in  discovering  the  need  of  some 
particular  article  and  supplies  that  need.  It  is  the 
manner  of  supplying  and  not  the  manner  of  selling 
that  the  purchasing  executive  calls  service. 

The  modern  purchasing  executive,  being  well  in- 
formed, does  not  require  a  great  deal  of  information 
upon  the  technical  details  of  the  article  under  dis- 
cussion, nor  is  he  likely  to  accept  promises  that  can- 
not be  fulfilled.  He  knows  the  principles  and  poli- 
cies of  the  concern  with  which  he  is  dealing  and  he 
knows  the  process  of  manufacture  through  which 
the  article  must  pass.  Very  often  a  promise  that 
cannot  be  fulfilled  will  tell  him  more  about  the  con- 
cern with  which  he  is  dealing  than  years  of  satis- 
factory business  transactions.  Having  a  compre- 
hensive knowledge  of  the  details  of  the  article  under 
discussion  the  purchasing  executive  naturally  ex- 
pects the  salesman  to  know  even  more  about  it  and 


SERVICE  67 

to  furnish  such  information  as  he  may  require.  He 
does  not,  however,  call  the  furnishing  of  this  in- 
formation service.  If  the  purchasing  executive 
gives  the  salesman's  readiness  or  ability  to  supply 
information  or  to  guarantee  the  fulfillment  of  cer- 
tain promises  a  name,  that  name  would  be  "  sales- 
manship" and  not  "  service. " 

The  salesman's  desire  to  give  personal  attention 
to  his  specific  needs  is  recognized  and  appreciated  by 
the  purchasing  executive,  but  here,  again,  he  is  more 
likely  to  apply  the  word '  *  salesmanship  * '  rather  than 
"  service, "  even  though  he  knows  that  the  personal 
attention  of  the  salesman  to  his  order  will  result  in 
service. 

The  modern  salesmanager  's  definition  of  service 
includes  all  of  the  attributes  demanded  by  the  pur- 
chasing executive,  but  entirely  different  points  are 
stressed  for  selling  purposes.  The  salesman  who 
sells  service — and  modern  salesmanship  includes  de- 
voting at  least  one-third  of  sales  effort  to  the  selling 
of  that  intangible  asset — without  definite  knowledge 
of  what  the  purchasing  executive  understands  by 
the  word,  is  skating  on  very  thin  ice  indeed.  And 
the  purchasing  executive  who  places  his  order  with 
a  firm  guaranteeing  service  without  specific  knowl- 
edge of  the  points  covered  by  that  guaranty,  is  not 
in  a  position  to  demand  redress  in  case  the  material 
purchased  does  not  come  up  to  his  expectations. 

What  the  Purchasing  Executive  Expects  When 
He  Buys  Service. — While  the  selling  concern  is 
stressing  service  (meaning  personal  attention  to  the 


68        THE  SCIENCE  OF  PURCHASING 

buyer's  particular  needs)  the  purchasing  executive 
may  be  interpreting  the  word  in  terms  of  delivery, 
placing  of  the  material  in  his  plant,  attention  to 
installation  and  prompt  repair  service  in  case  of 
breakdown.  The  salesman,  from  a  selling  point  of 
view,  knows  the  importance  of  these  attentions,  but 
to  him,  providing  full  technical  details  of  the  article 
offered  and  relieving  the  purchaser  of  all  physical 
effort  in  connection  with  his  purchase,  may,  and 
very  often  does,  lead  him  to  overlook  the  fact  that 
the  purchasing  executive  is  concerned  more  with  the 
definite  details  of  receiving  and  performance  of  the 
article  than  with  the  abstractness  of  sales  talk.  The 
salesman  emphasizing  personal  attention  often  loses 
sight  of  the  many  contingencies  that  may  arise  after 
the  order  has  passed  out  of  his  hands  and  into  the 
hands  of  the  manufacturing  or  shipping  depart- 
ments. To  him,  personal  attention  is  likely  to  stop 
with  his  surrender  of  the  signed  order  blank.  But 
the  purchasing  executive,  his  mind  upon  delivery, 
etc.,  is  not  aware  of  the  limited  scope  of  "personal 
attention"  and  "service"  of  which  the  salesman 
talks  so  glibly.  It  is  essential  for  the  best  interests 
of  each  that  the  seller  understands  the  attributes  of 
service  from  the  viewpoint  of  the  buyer  and  that  the 
buyer  understands  what  the  salesman  means  when 
he  promises  service. 

Summarizing  the  meaning  of  service  as  it  appears 
to  the  purchasing  executive  we  have : 

1.  Prompt  delivery  in  quality  and  quantity  or- 
dered. 


SERVICE  69 

2.  A  guaranty  that  guarantees. 

3.  Promises  unconditionally  made  good. 

4.  Purchasing  risks  fall  upon  the  seller. 

5.  Fair  dealing  and  businesslike  methods  on  the 
part  of  the  seller. 

6.  Attention  to  installation  (in  case  of  machinery 
or  appliance). 

7.  Attention  to  upkeep  of  machinery  and  appli- 
ances after  installation. 

8.  Prompt  delivery  of  reorder,  repair  parts,  sup- 
plies, etc. 


CHAPTER  VII 

COOPERATION  AND  COORDINATION 
BETWEEN  EXECUTIVES 

Reasons  for  Demanding  Coordination  of  Depart- 
ments.— The  purchasing  department  of  any  large 
corporation  exists  solely  for  the  purpose  of  provid- 
ing other  departments  with  necessary  materials  and 
supplies.  In  importance  it  ranks  with  the  manu- 
facturing, the  sales,  the  engineering  and  the  account- 
ing departments.  There  is  an  endless  chain  of  in- 
ter-dependence of  one  department  upon  another, 
each  unit  owing  its  individual  rise  or  fall  to  the 
degree  of  coordination  of  the  other  units  that  make 
up  the  whole.  A  faulty  or  incomplete  understand- 
ing of  the  function  of  one  department  by  the  head 
of  another  department  is  often  the  cause  of  grave 
misunderstandings  and  serious  blunders.  A  lack 
of  attention  to  seemingly  unimportant  details,  such 
as  exact  data  upon  requisitions,  careful  checking 
of  goods  received,  paying  of  invoices,  prompt  in- 
formation as  to  shipments  on  the  way,  etc.,  may  be 
the  reason  for  the  directors  of  the  business  to  put 
the  purchasing  department  down  as  inefficient  when, 
in  reality,  the  fault  is  in  one  of  the  departments  or 
subdepartments  interwoven  with  the  business. 

Because  of  the  fact  that  flaws  and  weak  spots  are 

70 


COOPERATION  AND  COORDINATION       71 

so  easily  traceable  to  the  purchasing  department, 
where  they  are  likely  to  stop,  it  behooves  the  pur- 
chasing executive  to  safeguard  himself  and  his  work- 
ers in  every  way  possible.  In  order  to  do  this,  he 
must  set  tactfully  about  putting  before  the  head  of 
each  department  the  vital  necessity  of  intelligent, 
cooperative  coordination  throughout  the  respective 
departments.  It  is  very  probable  that  he  will  be 
set  down  as  meddlesome  by  some  of  the  more  tem- 
peramental executives.  Very  often  his  insistence 
that  details  be  accurately  and  promptly  forwarded 
to  his  department  will  be  considered  as  "fussi- 
ness";  but,  in  justice  to  himself  and  to  his  firm, 
he  must  not  only  secure  active  cooperation  with  his 
department  but  coordination  as  well.  An  equal 
amount  of  pulling  together  is  necessary  between 
each  of  the  other  departments,  but  we  are  concerned 
mainly  with  purchasing  and  its  interrelation  to 
other  functional  parts  of  business  management. 

Responsibility  of  Purchasing  toward  Other  De- 
partments.— It  is  the  opinion  of  many  purchasing 
executives  that,  upon  the  efficiency  of  the  purchas- 
ing department,  depends  the  whole  existence  of  the 
manufacturing  concern.  This  is  a  broad  statement 
and  one  that  would  be  hotly  contested  by  the  sales, 
engineering,  manufacturing  and  accounting  depart- 
ments. Goods  should  be  assured  of  a  market  before 
primary  materials  are  purchased  or  manufacturing 
machinery  secured.  Having  located  the  probable 
consumer,  the  engineering  and  manufacturing  de- 
partments must  be  organized  and  running  smoothly 


72        THE  SCIENCE  OF  PURCHASING 

before  primary  materials  may  be  converted  into 
salable  articles.  The  financing  of  the  business  must 
be  arranged  for.  Credit  must  be  established  be- 
fore purchases  may  be  made.  Each  detail  must  be 
worked  out  carefully  in  relation  to  all  other  details. 

From  the  viewpoint  of  the  owners  and  directors, 
no  one  department  is  more  vital  than  any  other 
department  to  business  success.  It  is  generally  con- 
ceded, however,  that  a  badly  managed  purchasing 
department  may  do  more  toward  disrupting  the  well- 
oiled  machinery  of  a  going  concern,  than  the  mis- 
management of  any  other  department,  with  the  pos- 
sible exception  of  the  department  of  sales. 

The  purchasing  executive  is  charged,  primarily, 
with  the  procuring  of  materials  desired  in  the  ex- 
act quality  and  quantity  to  fill  the  requirements. 
If,  for  any  reason,  ignorance  of  needs,  lure  of  low 
price,  blandishments  of  trained  salesmen,  etc.,  he 
fails  to  do  this,  the  effect  will  be,  briefly,  as  fol- 
lows: 

1.  To  buy  a  higher  quality  of  material  than  re- 
quired increases  cost  of  manufacture  without 
a  relative  increase  in  the  value  of  the  article 
produced. 

2.  To  buy  a  lower  quality  than  required  increases 
cost,    by    decreasing    sales    through    lowered 
standard  of  output. 

3.  To  buy  in  too  large  quantities  increases  cost 
by  tying  up  capital,  by  larger  and  unnecesssary 
carrying  charges,  and  through  loss  of  materials 
by  depreciation,  falling  market,  etc. 


COOPERATION  AND  COORDINATION       73 

4.  To  buy  in  too  small  quantities  increases  cost, 
through  interrupted  continuity  of  operation 
and  curtailment  of  production. 

Each  of  the  above  effects  may  be  submitted  to 
endless  division  and  subdivision,  but  the  first  effect 
of  wrong  purchasing,  either  in  quality  or  quantity, 
like  the  first  effect  of  faulty  administration  in  any 
department,  is  upon  the  cost.  Cost  is  the  funda- 
mental basis  of  all  business  efforts. 

Interdependence  of  Purchasing  upon  Other  De- 
partments.— The  suitability  of  materials  purchased 
depends  in  turn  upon  the  completeness  of  data  upon 
requisitions  calling  for  these  materials.  The  head 
of  the  laboratories  who  requisitions  alcohol,  with- 
out specifying  that  it  is  to  be  used  for  testing  and 
must,  therefore,  be  first-grade,  grain  alcohol,  is  in 
no  position  to  lay  blame  upon  the  purchasing  de- 
partment if  he  receives  a  drum  of  wood  alcohol  or 
a  mediocre  grade  of  a  denatured  variety  commonly 
used  in  paints,  etc.  The  purchasing  executive  is 
aware,  no  doubt,  of  the  use  to  which  the  alcohol 
is  to  be  put  and  will  secure  the  kind  and  quality 
actually  required,  however  incomplete  the  data  may 
be.  But  it  should  not  come  within  the  province  of 
purchasing  to  fill  out  requisitions  before  they  are 
passed  on  to  the  order  clerk.  It  is  the  business  of 
the  purchaser  or  his  assistant  to  verify  each  re- 
quisition, but  those  requisitions  should  be  accur- 
ately filled  out  by  the  man  writing  them. 

In  case  the  desired  quality  of  materials  cannot  be 
procured,  samples  of  the  quality  or  qualities  avail- 


74        THE  SCIENCE  OF  PURCHASING 

able  should  be  sent  to  the  manufacturing  depart- 
ment for  test  and  analysis.  The  purchaser  is 
then  justified  in  making  the  purchase  in  accordance 
with  the  choice  of  that  department. 

The  quantity  purchased  should  be  governed  by 
the  rate  of  production,  the  storage  room  available, 
the  condition  of  the  market  and  the  financial  stand- 
ing of  the  firm  at  the  time  of  purchase.  For  infor- 
mation as  to  the  quality  and  quantity  purchased,  the 
purchasing  executive  is  dependent  entirely  upon  the 
departments  with  which  his  department  is  correlated. 
The  engineering,  manufacturing  and  accounting  de- 
partments are  in  closer  active  relation  to  purchas- 
ing than  is  the  sales  department,  but  even  here  there 
is  an  interweaving  of  activities. 

Detailed  Information  that  Must  Come  to  the  Pur- 
chasing Executive. — Much  of  the  knowledge  that  is 
required  by  successful  purchase  management  must 
be  obtained  from  sources  outside  the  organization 
itself.  Matters  of  supply  and  demand,  market 
fluctuation,  dependability  of  sellers,  etc.,  must  be 
sought  from  the  daily  news,  business  reports,  ex- 
perience, gossip,  etc.  But  data  upon  the  following 
points  are  obtainable  only  through  the  different  de- 
partments within  the  corporation,  and  upon  the  ac- 
curacy of  these  data  depends  the  successful  opera- 
tion of  the  purchasing  department. 

1.  Full  specifications  as  to  quantity,  quality,  and 
intended  use  of  materials  requisitioned. 

2.  Advance  information  as  to  curtailment  or  ex- 
pansion of  production. 


COOPERATION  AND  COORDINATION       75 

3.  Changes  in  specifications,  even  though  these 
changes  do  not  have  a  direct  bearing  upon  the 
materials  purchased. 

4.  Date  of  receipt  and  condition  in  which  goods 
are  received. 

5.  Maximum   and   minimum   limits   of   storage 
spaces. 

6.  Amount  received,  requisitioned  and  on  hand 
in  storeroom. 

7.  Rate  of  production. 

8.  Rate  of  sales. 

9.  Cost  of  production  and  selling. 

10.  Selling  price  and  gross  or  net  profit. 

11.  Overhead  expense  of  entire  organization. 

12.  Financial  standing  and  resources. 

13.  Specific  duties  and  responsibilities  of  each  de- 
partment, and  the  relation  of  these  depart- 
ments to  purchasing. 

Coordination  between  Engineering  and  Purchas- 
ing Departments.— The  first  requirement  made  by 
the  purchasing  executive  upon  the  engineering  de- 
partment should  be  for  exact  and  detailed  specifica- 
tions upon  requisitions.  It  would  seem,  at  first 
thought,  that  so  obvious  a  necessity  need  not  be 
stressed,  but  the  truism  that  the  more  a  man  knows 
the  less  is  he  able  to  tell,  applies  especially  to  the 
trained  engineer.  Perhaps  it  is  because  the  de- 
tails of  the  materials  requisitioned  -appear  so  simple 
to  him;  perhaps  it  is  because  the  typical  engineer 
is  inclined  to  live  with  his  head  in  a  cloud  of  figures ; 
but  it  is  generally  conceded  that  one  of  the  most 


76        THE  SCIENCE  OF  PURCHASING 

difficult  feats  in  purchasing  is  that  of  obtaining  all 
necessary  data  concerning  machinery,  appliances, 
specially  made  castings,  etc.,  from  the  engineering 
department. 

It  requires  tact  and  patience  on  the  part  of  the 
purchasing  executive  to  bring  about  a  clear  under- 
standing of  the  interrelation  of  specifications  and 
satisfactory  purchases.  General  coordination  be- 
tween all  departments  will  assist  the  purchaser  in 
gaining  the  friendly  cooperation  of  the  head  of  the 
engineering  department,  since  he  will  not  be  so 
likely  to  consider  the  attempt  at  " getting  together'' 
a  breach  of  business  etiquette  on  the  part  of  the 
purchasing  executive. 

Coordination  between  engineering  and  purchasing 
departments  will : 

1.  Eliminate  delays  caused  by  incomplete  data 
furnished  seller  when  asked  for  quotations. 

2.  Decrease   the    chances   of   purchasing   wrong 
materials. 

3.  Save  the  time  of  engineer  -and  purchaser  in 
answering  and  asking  questions. 

4.  Assist  in  reducing  cost  of  certain  materials 
through  simplification  of  details  (these  simplifi- 
cations are  often  suggested  by  the  seller  him- 
self). 

Relation  between  Manufacturing  and  Purchasing 
Departments. — It  is  from  the  manufacturing  depart- 
ment that  the  purchasing  executive  receives  the 
greater  number  of  his  requisitions,  since  it  is  that 


COOPERATION  AND  COORDINATION       77 

department  that  uses  the  large  bulk  of  materials 
and  supplies  purchased.  For  this  reason  the  pur- 
chasing executive  must  keep  in  closer  touch  with  the 
manufacturing  than  with  any  other  department 
within  the  organization.  Formerly,  and  even  to- 
day, in  many  of  the  less  modern  concerns,  purchas- 
ing was  a  division  under  the  manufacturing  depart- 
ment and  on  a  level  with  the  division  of  stores. 
That  the  stores  section  is  of  vital  importance  to 
purchasing  no  one  will  deny,  but  that  it  is  of  equal 
importance,  except  in  rare  cases,  is  to  be  doubted. 
The  relation  between  stores  and  purchasing  will 
be  taken  up  in  a  later  chapter.  Suffice  it  here  to  say 
that  between  the  stores  division  and  the  purchas- 
ing executive  there  must  be  a  direct  channel  through 
which  information  may  pass  promptly  concerning 
materials  received,  requisitioned,  and  on  hand,  to- 
gether with  reports  on  incompleted  orders,  condi- 
tion of  goods  delivered,  etc. 

Upon  the  manufacturing  department  must  the  pur- 
chasing executive  depend  for  his  information  as  to 
rate  of  production,  plans  of  curtailment  and  expan- 
sion, performance  of  materials  purchased,  labora- 
tory reports  on  samples  sent  in  for  test  and  analysis. 

The  manufacturing  department  depends  in  turn 
upon  the  purchasing  executive  for: 

1.  Prompt  delivery  of  proper  materials  and  sup- 
plies. 

2.  Maintaining  standard  of  quality  of  output. 

3.  Continuity  of  operation. 

4.  Keeping  up  to  standard  rate  of  production. 


78        THE  SCIENCE  OF  PURCHASING 

Interrelation  of  Sales  to  Purchasing  Department. 

— In  speaking  or  writing  of  the  five  important  units 
of  business  organization,  buying  and  selling  always 
come  Jfrrst  in  the  list.  These  are  followed  by  engin- 
eering, manufacturing  and  accounting,  with  their 
subdivisions  of  planning,  stores  and  credit,  etc. 
Materials  must  be  bought  before  they  may  be  sold, 
the  purchase  price  controlling  the  sales  price  to  a 
greater  or  lesser  degree,  according  to  the  type  of 
business  and  the  manufacturing  processes  involved 
in  the  conversion.  But  it  is  difficult  for  the  purchas- 
ing executive  to  show  the  salesmanager  the  vital  im- 
portance of  cooperation  and  coordination  between 
their  respective  departments. 

The  advertising  manager  is  interested  only  in  the 
finished  product  and  its  possibilities  of  appeal  to 
the  public  mind.  The  salesmanager  also  considers 
the  finished  product  together  with  methods  of  selling, 
etc.  To  these  men,  the  difference  between  purchas- 
ing and  sales  is  the  difference  between  primary  ma- 
terials and  the  finished  article.  The  manager  of 
the  production  department  is  called  into  consulta- 
tion with  the  sales  and  advertising  manager  at  fre- 
quent intervals  and  asked  to  assist  in  plans  for  the 
future.  He  it  is  who  most  often  passes  the  informa- 
tion as  to  these  plans  to  the  purchasing  executive. 
As  a  rule  this  information  comes  in  the  form  of  a 
tersely  worded  and  incomplete  requisition  for  cer- 
tain materials.  More  than  likely  "rush"  will  be 
scrawled  along  the  margin  of  the  requisition.  The 
purchasing  executive  is  expected  to  purchase  exactly 


COOPERATION  AND  COORDINATION      79 

what  is  required  at  a  price  that  will  be  satisfactory 
to  his  firm  and  to  have  the  materials  on  hand  at 
the  time  specified.  If  he  fails  in  these  require- 
ments (and  there  is  no  reason  why  he  should  not 
fail  in  one  or  all  of  them)  his  department  is  at  fault. 
There  are  many  examples  of  the  failure  of  an  adver- 
tising and  sales  campaign,  due  to  this  method  of 
keeping  the  purchasing  executive  in  ignorance  of 
the  plan  until  too  late  for  him  to  secure  the  proper 
materials  for  manufacturing. 

With  proper  coordination,  the  purchasing  execu- 
tive, the  engineer,  production  manager  and  account- 
ant join  the  sales  and  advertising  managers  in  out- 
lining future  plans.  In  this  way,  and  only  in  this 
way,  may  the  success  of  each  department  be  assured. 

The  purchaser  who  sits  back  quietly  and  allows 
conferences  to  go  on  about  him  without  protest 
is  justly  responsible  for  the  failure  of  plans  to  work 
out  according  to  schedule.  He  must  be  aggressive 
and  insistent  upon  his  share  in  the  plans  in  which 
his  department  plays  so  important  a  part.  The 
life  and  success  of  the  business  depends  upon  the 
coordination  of  all  departments,  but  cooperative  co- 
ordination between  purchasing  and  sales  depart- 
ments is  the  vital  element  in  manufacturing  and  sell- 
ing. 

Interrelation  between  Accounting  and  Purchasing* 
Departments. — There  is  a  vital  and,  as  yet  unreal- 
ized, need  of  coordination  between  the  department 
of  purchase  and  the  department  that  pays  the  bills 
for  goods  bought.  In  all  large  business  organiza- 


80        THE  SCIENCE  OF  PURCHASING 

tions,  provision  is  made  for  the  fixed  expenditures 
of  each  department.  These  expenditures  are,  as  a 
rule,  charged  to  manufacturing,  upkeep,  overhead, 
etc.,  according  to  the  system  of  accounting  em- 
ployed. They  include  salaries  of  employees,  per- 
centage of  rental,  insurance,  etc.  Besides  the  usual 
fixed  expense,  the  purchasing  department  also  spends 
a  large  part  of  the  total  income  of  the  business. 
This  expenditure  is  chargeable  to  the  different  de- 
partments using  the  materials  and  supplies,  but 
primarily  it  must  be  charged  to  the  purchasing  de- 
partment. As  a  rule,  provisions  are  made  in  the 
accounting  department  for  a  certain  weekly, 
monthly  or  semi-annual  purchase-expense  budget 
and  within  the  limitations  of  this  amount  the  pur- 
chasing executive  is  free  to  roam.  In  case  of  a 
temporary  shortage  of  funds,  however,  he  should  be 
warned  by  the  accounting  department  in  order  that 
he  may  not  overstep  the  bounds.  In  case,  also,  of  an 
unusually  large  purchase  at  especially  favorable 
terms,  the  order  should  not  be  placed  until  the  ac- 
counting department  has  been  informed  in  order 
that  it  may  prepare  for  payment  of  the  invoice. 

All  invoices  are  sent  to  the  purchasing  department 
for  approval.  It  is  the  custom  of  most  concerns 
where  discounts  are  taken,  to  have  all  bills  which 
are  subject  to  discount  approved  by  the  purchasing 
department  on  or  before  discount  date.  This  fre- 
quently means  that  approval  must  be  given  before 
the  material  is  received.  After  bills  are  paid  they 
are  usually  returned  to  the  purchasing  department 


COOPERATION  AND  COORDINATION       81 

for  comparison  with  goods  upon  receipt.  Since 
most  goods  are  sold  f .  o.  b.  shipping  point,  and  there- 
fore belong  to  the  purchaser  from  the  time  the 
shipper  receives  his  bill  of  lading  from  the  carrier,  it 
does  not  matter  that  goods  have  not  been  checked 
with  invoice  before  payment  is  made.  Any  reliable 
seller  will  as  gladly  make  necessary  adjustments 
after,  as  before,  receiving  payment. 

Through  cooperative  coordination  the  purchasing 
executive  may  assist  the  accounting  department  in : 

1.  Keeping  the  firm's  credit  good  by  prompt  ap- 
proval of  invoices. 

2.  Giving  prompt  information  as  to  unusually 
large  expenditures. 

3.  Curtailing  purchases  as  much  as  possible  dur- 
ing temporary  crises. 

4.  Giving  information  as  to  special  terms  not  ap- 
pearing on  invoices. 

Relation  of  Purchasing  to  Economy  of  Manufac- 
ture.— Only  recently  has  the  importance  of  standard 
quality  of  output  been  included  in  the  cost  figures 
of  manufacturers.  Much  has  been  done  in  recent 
years  along  the  lines  of  standardizing  the  quantity 
of  output — so  much  per  day,  per  man,  etc. — with 
closely  figured  cosit  of  manufacture.  But  the  stand- 
ard of  quality,  while  included  in  a  way,  has  been  al- 
lowed to  take  care  of  itself  to  an  astonishing  degree. 
Industrial  engineers  are  now  taking  up  the  question 
of  the  uniformity  of  quality  of  production,  study- 
ing it  consciously  instead  of  including  it  by  accident, 


82        THE  SCIENCE  OF  PURCHASING 

so  to  speak.  Cost,  according  to  these  engineers,  is 
not  only  a  matter  of  dollars  and  cents,  but  the 
measure  of  efficiency  of  labor  and  materials  com- 
bined to  produce  a  certain  quantity  of  a  certain 
standard  quality.  The  value  of  quality  may  be  high 
or  low  in  relation  to  quantity  of  output,  but  it  should 
grade  high  in  relation  to  price  and  in  comparison 
with  the  cost  of  manufacture. 

With  the  realization  of  the  fundamental  need  of 
manufacturing  a  uniform  quality  of  goods,  comes 
the  necessity  of  renewed  effort  on  the  part  of  the 
purchasing  director  to  obtain  for  his  factories  a 
uniform  quality  of  primary  materials.  It  is  in  the 
purchasing  department  that  uniformity  of  quality 
of  the  final  output  begins.  The  purchasing  execu- 
tive whose  mind  dwells  upon  price  to  the  exclusion 
of  quality,  paying  so  much  money  for  so  much 
primary  material  without  regard  to  the  market 
fluctuations,  will  frequently  force  the  production  de- 
partment to  produce  a  quantity  of  output  that  is 
below  the  standard  set  for  quality.  In  most  in- 
stances of  this  kind  it  is  the  production  department 
that  bears  the  brunt  of  the  burden  of  lowered  stand- 
ards. 

"With  the  recognition  of  the  importance  of  the 
purchasing  department  in  modern  business  organi- 
zations it  has  been  found  that  lack  of  coordination 
between  executives  is  the  real  cause  of  lowered 
standards.  The  purchasing  executive  is  being  more 
carefully  selected  and  more  fully  informed  as  to  the 
aims,  plans  and  standards  of  the  other  departments 


COOPERATION  AND  COORDINATION      83 

than  formerly.  He  is  not  only  picked  for  his 
ability  as  a  purchaser  but  for  his  cooperating  abil- 
ity as  well.  His  presence  is  vital  in  all  consulta- 
tions. The  modern  purchasing  executive  not  only 
considers  the  saving  of  money  on  his  purchases  but 
the  saving  of  losses  to  the  sales  department  through 
faulty  primary  materials  supplied  to  the  production 
department. 

Modern  business  is  beginning  to  link  uniformity 
of  quality  of  output  with  uniformity  of  quality  of 
primary  materials  to  the  advantage  of  the  produc- 
tion department,  whose  function  it  is  to  manufac- 
ture a  uniform  quality,  to  the  sales  department, 
whose  life  depends  upon  the  selling  and  repeated 
selling  of  goods  that  are  uniform,  and  to  the  pur- 
chasing department  in  which  all  uniformity  of 
finished  products  actually  begins  and  whose  man- 
agement may  make  or  break  the  concern.  Economy 
of  manufacture  is  no  longer  the  responsibility  of 
the  manufacturing  department  but  of  all  depart- 
ments, without  exception.  Joint  responsibilities 
cannot  be  discharged  without  cooperative  coordina- 
tion between  all  executives  within  the  organization. 


CHAPTER  VIII 
TECHNICAL  KNOWLEDGE  OF  REQUIREMENTS 

Vital  Necessity  for  Detailed  Knowledge.— There 
is  a  general  impression  that  the  purchasing  execu- 
tive is  present  for  the  sole  purpose  of  saving  money 
for  his  firm.  This  is  only  partly  true.  The  alert 
purchasing  executive  undoubtedly  does  save  money, 
but  he  does  not  do  it  by  purchasing  the  lowest 
quality  of  materials  at  the  lowest  price.  There  are 
examples  without  number  in  which  factories  and 
even  railroad  systems  have  been  crippled  or  tied  up 
because  of  the  misjudged  economy  of  a  short-sighted 
or  uninformed  purchasing  agent  who  bought  on 
price  instead  of  quality. 

The  real  job  of  the  director  of  purchases  for  any 
type  of  business  is  to  obtain  the  right  materials 
and  supplies,  and,  by  so  doing,  satisfy  the  technical 
needs  of  his  firm.  To  do  this  requires  comprehen- 
sive technical  knowledge  of  the  needs  of  his  firm, 
coupled  with  an  equally  broad  knowledge  of  the 
materials  procured.  Some  of  the  main  points  to 
consider  in  the  purchase  of  materials  are: 

1.  Proposed  use  of  the  article  purchased. 

2.  Manufacturing  process  of  material  purchased. 

3.  Technical  knowledge  of  price. 

84 


KNOWLEDGE  OF  REQUIREMENTS       85 

Proposed  Use  of  the  Purchase.— Without  a  knowl- 
edge of  the  ultimate  use  of  materials,  the  purchas- 
ing executive  may  not  differentiate  between  those 
that  are  suitable  and  those  that  are  not.  The  many 
competitive  articles  upon  the  market,  all  ostensibly 
for  the  same  general  purpose  (in  the  claims  of  sales- 
men, at  least),  compel  technical  comparison.  Each 
one  has  one  point,  usually,  in  which  it  excels  com- 
petitive merchandise ;  and  it  is  difficult  for  the  man 
without  technical  insight  to  select  for  his  firm  those 
materials  best  suited  to  requirements,  even  when 
his  own  technical  department  heads  assist  in  com- 
parison. It  may  happen  that  the  main  point  in 
which  one  article  excels  another  is  the  one  that  tech- 
nically makes  that  article  useless  for  the  purpose  for 
which  the  executive  is  buying.  There  are  many  ad- 
dressing machines,  for  instance,  all  offered  for  gen- 
eral business  use;  but  the  size  of  the  address  list 
and  the  frequency  of  changes  really  determines  the 
selection  of  a  machine,  because  of  the  differing  types 
of  machines  and  the  cost  involved. 

In  the  purchase  of  machinery  one  of  the  im- 
portant items  for  consideration,  aside  from  the  value 
of  the  machinery  itself,  is  its  location  in  the  building 
or  plant.  What  floor  space  is  available?  Will  a 
box  machine  requiring  twenty  square  feet  be  as  suit- 
able as  one  requiring  a  higher  ceiling  but  less  floor 
space?  In  selecting  a  motor  the  purchasing  execu- 
tive must  not  only  know  the  horsepower,  voltage 
and  cycle,  but  whether  it  must  be  open  or  closed 
as  a  protection  against  moisture;  whether  a  pulley 


86        THE  SCIENCE  OF  PUECHASING 

extension  is  necessary  or  would  be  useful,  etc.  If 
he  is  buying  roofing,  he  must  take  into  consideration 
the  climatic  conditions,  which  in  New  York  require 
very  different  qualities  from  California  or  Texas. 
What  is  the  nature  of  the  building  upon  which  the 
roofing  is  to  go?  Will  tile  be  satisfactory,  or  is  it 
too  heavy?  If  he  is  buying  carbon  paper  for  the 
office-workers,  how  many  copies  of  letters,  orders, 
etc.,  are  to  be  made  at  one  time  ?  Must  the  quality 
be  light  weight  or  heavy  weight  ?  What  color,  etc.  ? 
It  is  not  the  business  of  the  purchasing  executive 
to  waste  his  time  in  looking  up  the  detailed  uses 
of  each  purchase  he  is  called  upon  to  make,  but  a 
general  knowledge  is  essential,  and  this  must  be 
augmented  by  explicit  information  to  which  he  may 
refer  in  case  of  doubt.  In  all  probability  he  knows 
approximately  what  is  needed  through  the  placing 
of  previous  orders,  records  of  which  are  available  in 
his  office.  But  upon  receipt  of  a  requisition  for  new 
or  unfamiliar  materials  it  behooves  him  to  make  a 
personal  investigation  as  to  the  use  of  this  material. 
There  is  always  a  possibility  that  the  man  mak- 
ing the  requisition  does  not  know  exactly  what  he  is 
specifying.  In  fact,  this  is  more  or  less  chronically 
the  case.  There  are  innumerable  instances  wherein 
the  purchasing  executive  bought  exactly  what  was 
specified  and  learned  afterward  that  the  article  de- 
sired was  entirely  different  from  the  one  ordered. 
In  the  case  of  chemicals,  especially,  too  much  stress 
cannot  be  put  upon  the  necessity  of  exact  knowledge 
of  the  ultimate  use  to  which  they  are  to  be  put. 


KNOWLEDGE  OF  EEQUIREMENTS      87 

Manufacturing  Processes  of  Materials  Purchased. 

— To  know  through  what  processes  the  materials  to 
be  purchased  have  passed  is  to  reduce  the  danger  of 
wrong  buying  to  a  minimum.  This  knowledge  is 
closely  allied  to  the  specialized  knowledge  of  values 
*  in  the  matter  of  price.  It  has  been  summed  up  (by 
Eendsfoos)  as  consisting  in  the  ability  to  substitute 
standard  labor  and  standard  material  for  special. 
The  cost  of  standard  material  is,  of  course,  much 
lower  than  that  of  special,  but  without  the  knowl- 
edge of  how  the  material  is  manufactured,  what 
materials  and  what  labor  have  gone  into  the  manu- 
facture of  it,  the  purchasing  executive  may  not 
know  that  he  is  paying  for  special  labor  and  materi- 
als. Knowing  what  the  process  is,  through  which 
the  raw  materials  have  passed  in  order  to  be  avail- 
able for  his  purposes,  the  alert  purchasing  execu- 
tive is  able  to  divide  his  source  of  supply  into  two 
classes,  those  who  are  equipped  to  fill  his  orders  and 
those  who  are  not.  Orders  should  be  placed  with 
those  firms  that  specialize  in  the  particular  com- 
modity demanded.  A  small  shop  may  be  quite  will- 
ing to  accept  the  order  and  either  manufacture  the 
article  by  hand  with  special  labor  cost  and  often  with 
less  efficiency,  or  it  may  sublet  the  order  to  the 
very  factory  to  whom  it  should  have  gone  in  the  first 
place.  In  either  event,  the  concern  placing  the 
order  will  pay  a  higher  price  than  is  necessary  for 
the  commodity. 

Combining  the  knowledge  of  the  cost  of  the  raw 
material  incorporated  in  the  manufacture  of  the 


88        THE  SCIENCE  OF  PURCHASING 

material  purchased  with  the  process  and  the  ap- 
proximate cost  of  manufacture,  the  purchasing  ex- 
ecutive has  at  hand  a  reliable  basis  upon  which  to 
judge  price-fairness. 

Manufacturing  Process  in  Relation  to  Time  Ele- 
ment.— The  element  of  time  is  an  item  in  the  pur- 
chase of  supplies,  and  here  again  enters  the  neces- 
sity for  a  knowledge  of  the  process  of  manufacture. 
A  purchase  is  a  transaction  that  is,  in  effect,  per- 
formed at  some  future  date.  The  date  of  delivery 
of  the  material  is  stated  definitely  by  both  parties 
to  the  contract  at  the  time  of  signing.  If  the  proc- 
ess of  manufacture  is  such  that  delivery  of  the 
goods  may  not  be  effected  until  six  months  after 
the  order  is  placed,  it  would  be  foolish  for  the  pur- 
chasing» executive  to  demand,  and  the  salesman  to 
promise,  immediate  delivery,  or  delivery  in  three 
months.  And  yet  just  such  demands  and  promises 
are  made  every  day  and  by  the  more  reliable  houses, 
too.  The  purchasing  executive,  who  knows  how  long 
it  will  take  to  make  the  particular  article  his  firm 
demands,  will  place  his  order  in  ample  time  to  as- 
sure delivery;  and  he  will  see  that  the  selling  con- 
cern is  forced  to  carry  out  its  part  of  the  con- 
tract. 

One  of  the  most  effective  ways  of  applying  pres- 
sure in  case  of  delayed  delivery  is  by  first  finding 
out  the  reason  for  the  delay  and  then  pointing  out 
to  the  manufacturer  how  this  difficulty  may  be  over- 
come. Giving  the  manufacturer  and  his  salesman 
to  understand  that  the  purchasing  executive  knows 


KNOWLEDGE  OF  REQUIREMENTS       89 

all  about  the  article  purchased,  from  the  raw 
material  to  the  time  of  delivery,  has  the  effect  of 
securing  the  best  possible  service  for  the  firm  buy- 
ing the  material. 

Knowledge  of  Price. — The  successful  purchasing 
executive  is  a  storehouse  of  detailed  information, 
and  especially  is  his  mind  filled  with  price  lore. 
This  knowledge  of  values,  even  without  the  exact 
price  paid,  is  absolutely  essential,  and  may  be  de- 
veloped only  through  experience  in  buying,  practice 
in  approximating  the  cost  of  purchases,  and  close 
application  to  current  market  quotations.  The  pur- 
chasing executive  who  buys  only  a  few  articles,  in 
large  or  small  quantities,  will  be  able  to  remember 
exactly  what  he  has  paid  in  a  great  many  instances, 
but  if  he  is  in  daily  contact  with  a  multitude  of 
different  articles,  he  may  not  hope  to  keep  the  list 
of  prices  in  his  mind.  For  this  reason,  and  for 
reference  at  all  times,  the  cost  record  should  be  kept 
separately  from  other  records. 

There  are  many  methods  of  strengthening  the 
"  price  memory, "  but  the  purchasing  executive  him- 
self is  the  one  best  able  to  decide  which  of  these 
methods  is  most  satisfactory  to  him.  The  daily 
trade  papers  contain  price  information  on  all  raw 
materials  and  many  finished  and  semifinished 
articles.  It  is  a  physical  impossibility  for  the  busy 
executive  to  follow  these  papers  daily,  but  he  may 
keep  in  touch  with  the  general  trend  of  the  market 
and  specialize  upon  those  materials  in  which  he  is 
vitally  interested.  The  executive  who  sees,  through 


90        THE  SCIENCE  OF  PURCHASING 

market  quotations,  an  era  of  high  or  low  prices  in 
certain  commodities  is  prepared  to  save  a  great 
deal  of  money  for  his  firm  through  heavy  or  light 
buying  at  the  right  time. 

Knowledge  of  Values. — Knowing  values,  the  mas- 
ter of  price  will  rightly  look  with  suspicion  upon 
the  prices  that  are  too  low;  but  in  comparing  prices 
he  must  take  care  that  the  basis  of  quotation  is  the 
same  in  quality,  standards,  specifications,  delivery, 
terms  of  payment,  etc.  In  order  to  secure  business, 
irresponsible  or  reckless  firms  sometimes  make  ridi- 
culously low  prices,  and,  having  deprived  a  com- 
petitor of  the  order,  become  indifferent  about  its  ex- 
ecution, or  find  means  of  boosting  the  price.  Care 
must  be  taken  that  the  order  is  placed,  not  with  the 
lowest  bidder,  all  other  things  being  equal,  but  with 
the  lowest  responsible  bidder. 

The  purchasing  executive  who  knows  values  will 
investigate  thoroughly  any  bid  that,  to  all  appear- 
ances, is  too  high.  Perhaps  the  quality  of  the  article 
quoted  will  better  serve  the  purpose  of  the  company 
than  the  quality  bid  upon  by  other  firms.  The 
higher  priced  material  may  last  longer  or  go  farther, 
or  in  some  other  way  prove  an  economy  in  the  end. 
Inquiries  as  to  the  reason  for  the  higher  price  may 
elicit  information  that  will  prove  invaluable  to  the 
purchasing  executive  in  pointing  out  to  him  the  fact 
that  his  firm  is  demanding  an  especially  made  article 
which,  through  a  few  minor  changes  in  the  plant, 
may  be  substituted  with  a  standard  article.  The 
saving  thus  accomplished  on  one  order  will  Borne- 


KNOWLEDGE  OF  REQUIREMENTS       91 

times  cover  the  expense  of  the  changes  necessary  in 
order  to  use  the  standard  article. 

Price  versus  Performance.— -Under  the  old  system 
of  buying,  when  each  separate  department  made  out 
its  requisitions,  and  very  often  interviewed  the  sales- 
men as  w.ell,  the  purchasing  department  had  very 
little  to  say  about  price  or  quality  of  the  goods  for 
which  orders  were  written.  The  matter  of  the  suit- 
ability of  the  material  purchased,  for  the  use  to 
which  it  was  to  be  pat  was  merely  the  opinion  of 
one  individual.  Under  the  old  regime  the  highest 
price  was  supposed  to  purchase  the  highest  quality. 
In  the  eyes  of  the  buyer,  the  test  of  performance 
did  not  enter  into  the  transaction.  Then  it  was  the 
policy  of  the  greater  number  of  buyers  to  purchase 
only  the  best — the  "best"  being  the  highest-priced 
article  obtainable.  Then  the  price  was  the  guaranty 
of  suitability. 

All  this  has  been  changed  in  modern  business  man* 
agement.  Purchases  are  centralized  with  a  special- 
ist in  charge.  Only  on  rare  occasions  does  the  sales- 
man get  beyond  the  office  of  the  purchasing  execu- 
tive to  talk  to  an  engineer  or  foreman.  The  suit- 
ability of  different  materials  is  decided  by  test  and 
analysis,  and  the  purchasing  executive  has  the  final 
decision  as  to  placing  his  order.  He  knows,  through 
reports  from  the  laboratories  on  samples  submitted, 
which  priced  material  is  best  suited  for  the  purpose 
to  which  it  is  to  be  put.  He  knows  that  the  highest- 
priced  material  is  not  always  the  best  for  his  use 
and  that  the  lowest-priced  material  is  not  always 


92        THE  SCIENCE  OF  PURCHASING 

the  cheapest  in  the  end.  He  buys,  not  on  price  but 
on  performance,  first,  last,  and  always. 

Data  Necessary  for  Successful  Purchasing.— The 
purchasing  executive  who  knows  the  value  of  all 
commodities  to  his  particular  concern  is  fortunate 
indeed.  He  is  then  able  to  weigh  each  point  care- 
fully from  all  angles,  sifting  the  important  from  the 
unimportant  data  accumulated.  He  can  decide  as 
to  the  suitability  of  the  material  submitted,  the  fair- 
ness of  the  price  asked,  and  the  ability  of  the  selling 
concern  to  live  up  to  its  contract.  His  specialized 
knowledge  assisted  by  detailed  information  at  hand 
in  his  office  is  his  assurance  that,  so  far  as  is  humanly 
possible,  he  will  secure  for  his  firm  those  materials 
and  supplies  that  will  come  up  to  the  standards  set. 

The  requisitions  for  supplies  as  written  by  the 
different  departments  or  by  the  storekeeper  are,  as 
a  rule,  far  from  the  dependable  sources  of  informa- 
tion that  they  should  be.  Incomplete  or  inexact  data 
as  to  kind,  quality  and  intended  use  6f  the  material 
requisitioned  usually  appear  on  the  request  in  place 
of  the  full  specifications  or  the  number  or  sign  in- 
dicating the  file  in  which  this  information  may  be 
found.  Even  in  case  of  standardized  materials  and 
supplies,  when  all  that  is  necessary  upon  the  requisi- 
tion is  the  standardized  number  or  size,  the  impor- 
tant symboj  is  often  either  omitted  entirely  or 
wrongly  given. 

In  addition  to  requisitions  and  the  data  which 
should  be  written  thereon,  there  must  also  be  on  file, 
in  the  office  of  the  purchasing  executive,  inspection 


KNOWLEDGE  OF  REQUIREMENTS       93 

reports,  laboratory  analyses  and  physical  tests  of 
the  material  used  and  of  material  which  may  be 
used  at  some  future  time.  Of  course,  all  commodi- 
ties are  not  adaptable  to  all  kinds  of  tests,  and  it 
may  not  be  deemed  necessary  to  secure  specialized 
reports  upon  every  article  purchased  by  the  firm, 
but,  broadly  speaking,  some  sort  of  analysis  should 
be  at  hand  that  may  be  depended  upon  by  the  pur- 
chasing executive  whose  duty  it  is  to  know  exactly 
what  he  is  buying  and  why  he  is  buying  it. 

There  should  be  a  record  of  the  past  performance 
and  quantities  used,  in  comparison  with  other  quali- 
ties of  materials  which  have  been  tested  from  time 
to  time,  available  in  the  office.  The  purchasing  ex- 
ecutive must  be  ever  on  the  alert  for  new  materials 
that  may  prove  superior  to  the  old,  and  for  deteri- 
oration in  those  materials  now  being  used.  Partic- 
ularly must  he  guard  against  buying  goods  on  mere 
precedent.  Business  houses  are  constantly  chang- 
ing, and  the  firm  that  supplied  certain  materials 
which  were  satisfactory  two  years  ago  may  have 
changed  to  such  an  extent  that  it  is  not  supplying  the 
same  quality  as  formerly.  A  constant  check  should 
be  maintained  upon  all  materials,  no  matter  how  re- 
liable the  concern  that  is  furnishing  them. 

Many  concerns  maintain  on  their  staffs  special- 
ists in  the  more  important  materials  used.  For  ex- 
ample, the  International  Harvester  Company  has, 
attached  to  its  purchasing  department,  a  specialist 
on  wood,  an  expert  on  paint  and  an  expert  on  steel, 
etc.  For  small  firms,  this  is  not  practical,  but  they 


94        THE  SCIENCE  OF  PURCHASING 

hare  recourse  to  consultation  services  of  profes- 
sional experts  whose  business  it  is  to  furnish  ac- 
curate reports  upon  the  materials  sent  to  them  for 
analysis. 

Guarding  against  Unnecessary  Purchasing. — In 
all  business  houses  there  is  bound  to  be  a  great 
amount  of  lost  motion  due  to  the  manifold  activities 
being  carried  on  under  the  jurisdiction  of  different 
department  heads.  The  director  of  purchase, 
through  the  requisitions  that  come  to  his  desk,  is 
enabled  to  keep  in  touch  with  much  that  is  transpir- 
ing about  him  without  the  necessity  of  leaving  his 
office  or  conversing  with  any  but  his  own  staff  of 
workers.  It  is  a  well-known  fact  that,  in  all  big 
organizations,  the  province  of  the  different  depart- 
ments must  of  necessity  overlay  at  some  point.  This 
conflicting  of  activities  naturally  finds  its  center  in 
the  office  of  the  purchasing  executive. 

Through  requisitions  for  materials  and  supplies 
he  learns,  for  example,  that  the  engineering  depart- 
ment is  building  an  addition  to  the  plant  and  install- 
ing new  labor-saving  devices  in  place  of  old.  He 
learns  also  that  the  operating  department  is  re- 
pairing a  floor  or  building  a  platform  and  patching 
up  an  old  machine  with  new  parts.  By  combining 
the  requisitions  for  lumber  for  building  and  repairs, 
the  alert  purchasing  executive  is  enabled  to  obtain 
a  better  price  in  the  larger  order.  Or  it  may  be 
possible  to  use  parts  of  the  machinery  discarded  by 
the  engineering  department  to  patch  up  the  old 
machine.  Again,  by  referring  to  his  files  of  goods 


KNOWLEDGE  OF  KEQUIREMENTS      95 

received,  he  learns  that  a  new  typewriter  has  been 
delivered  to  one  department  and  discovers  that  the 
old  machine  will  fill  the  needs  of  the  half-time  oper- 
ator in  another  department. 

To  keep  the  need  of  purchasing  at  a  minimum, 
the  purchasing  executive  must  see  to  it  that  the 
goods  or  supplies  bought  are  not  wasted.  There  is 
a  general  human  tendency  to  be  lavish  with  supplies, 
when  a  large  stock  is  on  hand  and  freely  distributed. 
To  guard  against  leaks  of  this  kind,  large  corpora- 
tions make  it  a  rule  that,  in  order  to  get  a  new  article, 
the  old  one  must  be  turned  in.  Express  companies 
have  this  ruling  in  regard  to  lead  pencils.  Em- 
ployees asking  for  a  new  pencil  must  hand  in  the 
stub  of  the  old  one.  The  lead  is  extracted  from  in- 
delible pencils  thus  turned  in  and  is  used  to  make 
indelible  ink  for  the  counter. 

At  the  risk  of  getting  into  the  bad  graces  of  mem- 
bers of  his  organization  and  of  gaining  a  reputation 
for  stinginess,  the  purchasing  executive  should  use 
every  possible  means  of  guarding  against  waste  and 
needless  buying.  But  the  purchasing  executive  is 
a  busy  man.  It  is  not  witliin  the  physical  prowess 
for  him  or  his  assistants  to  catch  all  duplicate  or 
unnecessary  orders.  He  can,  however,  keep  care- 
ful watch  and  by  asking  for  the  cooperation  of  the 
departments  making  requisitions  he  may  reduce  the 
purchase  expense  to  the  lowest  possible  point. 

Quantity  Purchases.— Within  the  last  few  years  a 
new  policy  has  appeared  among  sellers  as  to  the 
quantity  purchase.  Particularly  in  connection  with 


96        THE  SCIENCE  OF  PURCHASING 

wholesalers  and  jobbers  has  this  change  been  evi- 
dent. The  old  sales  plan,  based  on  the  theory  that 
the  cost  of  selling  and  handling  the  larger  order 
was  less  than  the  cost  of  the  small  order,  is  fast 
passing  into  the  limbo  of  the  out  of  date.  Modern 
business  has  decided  that  the  price  should  be  based 
upon  the  type  or  character  of  the  firm,  rather  than 
upon  the  quantity  of  goods  purchased  by  that  firm. 
This  new  policy  has  developed  through  the  attempt 
of  manufacturers  to  prevent  price  cutting  of  stand- 
ard articles  made  possible  by  the  low  price  at  which 
large  quantities  were  formerly  sold. 

For  the  benefit  of  the  manufacturer  who  buys, 
however,  there  still  exists  a  price  differential  be- 
tween carload  and  less-than-carload  lots.  In  order 
to  increase  the  size  of  their  sales,  sellers  offer  the 
inducement  of  a  lower  price  for  quantity  purchases. 
Many  modern  purchasing  executives  depend  largely 
upon  this  reduction  in  their  efforts  to  make  their 
departments  show  a  saving  at  the  end  of  the  fiscal 
year.  It  often  happens  that  this  practice  has  dis- 
advantages that  outweigh  the  advantages,  however, 
and  care  should  be  taken  to  consider  the  quantity 
purchase  from  all  angles. 

In  order  to  accomplish  a  real  saving  on  the  large 
order,  the  purchasing  executive  must  have  accurate 
knowledge  of  the  storing  facilities  of  his  concern. 
The  oversupply,  when  delivered  all  at  once,  is  likely 
to  cost  more,  despite  the  very  good  margin  allowed, 
than  the  small  quantity,  even  though  an  appreciably 
higher  price  has  been  paid  for  the  lesser  order.  The 


KNOWLEDGE  OF  EEQUIEEMENTS       97 

disadvantages  of  stocking  and  storing  an  unneces- 
sarily large  supply,  subject  to  deterioration,  depre- 
ciation, theft,  fire  damage,  and  loss  of  interest  on 
the  money  invested  should  be  considered  as  of 
greater  importance  than  mere  price. 

Quantity  Purchase  under  Blanket  Orders. — The 
disadvantages  of  placing  the  larger  order  for  the 
purpose  of  effecting  an  economy  is  largely  obviated 
under  the  blanket  order.  This  form  of  order  may 
cover  any  length  of  time  and  any  quantity  of 
material..  It  must  be  drawn  up  accurately,  care  be- 
ing taken  to  incorporate  in  the  space  between  the 
heading  and  the  signature  of  the  purchasing  execu- 
tive all  information  necessary  to  assure  the  filling 
of  the  order  precisely  according  to  the  quality,  quan- 
tity, price,  and  time  of  delivery  agreed  upon.  A 
blanket  order  may  be  so  worded  as  to  cover  every 
possible  contingency.  It  may  call  for  a  definite 
quality  to  be  delivered  as  called  for,  or  to  be  shipped 
on  certain  specified  dates  throughout  the  time  cov- 
ered by  the  order.  It  may  call  for  the  supplying  of 
"the  entire  requirements  of  the  buyer  for  a  speci- 
fied time  at  a  certain  price  or  at  the  market  price." 
It  may  call  for  the  supplying  of  the  buyer's  "entire 
requirements  in  a  certain  line,  at  a  sliding  scale  of 
prices  depending  upon  the  quantity  consumed  dur- 
ing a  certain  period."  It  may  call  for  the  seller's 
entire  output. 

In  placing  a  blanket  order  the  purchasing  execu- 
tive is  at  liberty  to  combine  any  desired  group  of 
requirements,  submitting  these  to  the  seller  for  rati- 


08        THE  SCIENCE  OF  PURCHASING 

fication.  With  the  purchaser's  carefully  worded 
blanket  order  at  hand,  it  then  falls  upon  the  sell- 
ing concern  to  decide  which  of  the  requirements 
specified  can  or  cannot  be  filled,  and  an  order  equally 
satisfactory  to  both  parties  to  the  contract  may  be 
drawn,  if  necessary,  with  concessions  made  by  both 
the  buyer  and  the  seller. 


CHAPTER  IX 

THE  STUDY  OF  FUTURE  TRENDS 
AND  FORECASTS 

The  Proven  Need  of  Forecast  Study  in  Purchasing. 

— The  severe  depression  of  1921  had  as  one  effect  the 
impressing  of  business  men  with  the  great  practical 
need  of  studying  forecasts,  trends  and  business 
cycles,  particularly  from  the  purchasing  point  of 
view.  Many  business  reputations  were  lost  during 
this  period,  because  of  over-optimistic  buying,  or  the 
reverse.  "Hunch"  was  used  as  against  detailed 
analysis — with  disastrous  results.  One  over-pessi- 
mistic banker  has  said,  "I  am  through  with  these 
men  who  claim  to  have  'vision/  They  have  cost 
me  millions."  But  what  he  really  meant  was  that 
men  of  roseate  visions  and  mirages  had  failed. 
Vision  based  on  competent  forecasting  is  the  safest 
of  procedures.  Untold  millions  were  "written  off" 
of  inventories  during  1921  as  a  result  of  failure  to 
forecast  the  coming  slump  which  had  been  clearly 
predicated  by  competent  forecasters. 

An  article  appeared  in  a  business  magazine  early 
in  1921,  entitled  "Why  Some  Big  Corporations  were 
Caught  with  the  Goods."  Its  opening  paragraph 
was  something  like  this:  "We  daily  read  in  the 
newspapers  such  headings  as  'Chicago  Whole- 

99 


100      THE  SCIENCE  OF  PURCHASING 

salers  Write  Off  $7,750,000  Depreciation ';  'Big 
Packing  Company  Did  $900,000,000  Business  with 
Practically  No  Direct  Profit.'  "  Such  statements 
about  big  business  are  rather  startling  to  the  average 
layman  and  make  him  wonder  why  these  giants  of 
industry  had  to  acknowledge  to  their  stockholders 
that  the  slump  in  value  of  the  last  three  months  of 
1920  wiped  out  all  their  substantial  profits  for  the 
balance  of  what  started  as  probably  their  most 
profitable  year. 

However,  it  is  interesting  to  note  the  reason  for 
the  great  losses  by  deflation,  and  remember  that  al- 
most as  great  losses  can  be  sustained  by  failing  to 
prepare  for  an  advancing  market.  This  is  one  of 
the  especial  problems  of  the  purchasing  agent  and 
is  one  which  he  must  consider  most  intensively  and 
with  competent  assistance. 

Effects  of  Deflation  on  Purchasing. — It  was 
clearly  demonstrated  that  many  companies,  in  the 
active  market  of  the  post-war  boom,  were  "  caught 
with  the  goods, ' '  and  it  is  probably  equally  true  that 
many  in  an  improving  market  have  been  "  caught 
without  them."  Of  course,  the  object  of  all  pur- 
chasing agents  is  to  prevent  loss  to  the  organizations 
from  either  cause.  To  illustrate  the  effect  on  a  busi- 
ness, when  not  buying  with  the  market,  the  two  fol- 
lowing instances  are  cited  which  came  under  the 
observation  of  Park  Mathewson,  inventor  of  the 
Business  Barometer  Dial,  in  the  boom  of  late  1919 
and  early  1920,  and  the  deflation  period,  at  the  end 
of  the  latter  year : 


FUTURE  TRENDS  AND  FORECASTS  101 

One  large  manufacturing  concern  in  New  England 
used  every  means  of  careful  analysis  and  checking, 
estimating  and  forecasting  its  needs,  through  budget- 
ary control  of  buying,  selling,  expense,  etc. 
Through  such  intensive  means  of  analysis,  in  con- 
nection with  what  it  gathered  from  carefully  scan- 
ning the  reliable  forecasts  of  banking  and  business 
houses  or  publications,  the  company  began  in  the 
early  part  of  1920  to  reef  its  sails  and  make  for  the 
business  shore  with  as  little  ballast  aboard  as  pos- 
sible. By  summer  it  was  running  very  light,  and 
when  the  squall  of  the  buyers'  strike  hit  the  United 
States,  it  was  in  the  best  position  to  work  along  out 
of  deep  waters  with  the  least  possible  damage.  In 
other  words,  by  analyzing  and  following  the  funda- 
mental trends  of  business  this  organization  had  fore- 
judged the  falling  conditions,  which  many  analysts 
and  forecasters  had  foretold. 

Another  company  in  practically  the  same  line,  lo- 
cated in  the  middle  west,  followed  the  trend  of  its 
buyers  who  were  ordering  freely  and  who  continued 
to  do  so,  well  into  the  summer.  On  the  surface  it 
seemed  necessary  to  carry  a  big  stock,  and  this  com- 
pany was  caught  with  a  high  record  inventory  on 
the  first  of  July.  The  wholesale  markets  had  al- 
ready begun  to  slump  and  by  the  end  of  the  year 
some  of  its  goods  on  hand  had  depreciated  nearly 
70  per  cent  in  value.  Purchasing  agents  will  know 
without  being  told  what  happened  to  its  profits  and 
also  to  its  surplus.  In  fact,  the  depreciation  on  its 
$50,000,000  inventory  practically  wiped  out  its  sur- 


102      THE  SCIENCE  OF  PURCHASING 

plus  of  $20,000,000  and  profits  for  the  year  as  well. 

An  example  of  this  kind  is  a  practical  object  lesson 
to  show  that  wise  policy  and  technic  by  a  purchasing 
agent  can  save  the  profits  of  five  years  of  operation 
in  an  emergency. 

Business  Cycles  and  Planning  Ahead.— The  pur- 
chasing agent  should  be  in  the  " crow's  nest"  or 
"lookout,"  of  the  business  craft  equally,  if  not 
more  often,  than  the  sales  director.  The  sales  de- 
partment may  figure  out  its  plans  for  a  year  ahead, 
but,  without  the  purchasing  agent's  cooperation  in 
obtaining  the  raw  materials  to  manufacture,  or  the 
finished  materials  for  them  to  resell,  on  terms  at  a 
price  that  will  meet  competition  at  the  time  of 
sale,  the  sales  department,  as  well  as  the  financial 
department,  will  be  greatly  handicapped  and  the 
aim  of  all  departments — profit — will  be  that  much 
lessened  if  not  entirely  consumed.  The  funda- 
mental saving  of  economic  tendency,  or  the  "busi- 
ness cycle,"  may  be  the  responsible  factor.  It  can- 
not be  overlooked  without  grave  danger. 

There  has  been  much  discussion  of  the  "business 
cycle,"  and  its  irresistible  effect  on  business,  prices, 
and  profits.  When  the  cycle 's  trend  has  not  reached 
its  full  swing  it  constitutes  practically  an  irresist- 
ible business  pressure — like  the  tides  of  the  sea. 
When  it  starts  up  steadily  it  is  almost  equally  futile 
to  resist  its  trend.  We  do  not  as  seriously  regard 
the  forward  trend  as  we  do  the  backward,  for  the 
reason  that  we  can  usually  make  money  while  prices 
and  business  are  increasing,  whereas,  we  are  pretty 


FUTURE  TRENDS  AND  FORECASTS  103 

sure  to  lose  money  when  they  are  decreasing,  at  least 
on  inventory  on  hand.  When  we  are  approaching 
an  upswing  in  the  business  cycle,  it  is  profitable  to 
give  attention  to  the  conditions  which  manifest  them- 
selves. 

Changes  in  Quantity  or  Kind  of  Goods  to  Be 
Bought. — Sometimes  we  need  not  fear  any  extreme 
increase  in  prices  but,  what  is  almost  equally  im- 
portant, we  may  run  into  a  heavily  increasing  bulk 
of  business  or  the  buying  of  a  different  class  or 
quality  of  goods. 

Therefore,  it  is  important  that  the  men  in  the 
lookout  study  the  distant  horizon,  as  well  as  the 
immediate  sea  around  them,  in  order  to  sense,  at 
the  earliest  moment,  the  changes  which  are  always 
brewing  in  the  big  beyond.  As  the  astute  purchas- 
ing agent  knows,  it  is  the  part  of  wisdom  to  buy 
"early  and  often"  in  the  forward  swing  of  the  busi- 
ness cycle,  as  it  would  naturally  be  to  buy  sparingly 
when  it  is  on  its  backward  curve.  However,  each 
purchasing  agent  should  be  the  buying  pilot  for  his 
own  boat,  no  matter  how  many  compasses,  barom- 
eters, charts  and  other  useful  instruments  he  may 
employ  to  assist  him  in  his  navigation.  There  are 
details  in  each  business  which  are  individual  to  that 
business,  and,  therefore,  it  is  not  possible  to  advise 
generally  when  and  how  to  buy  or  sell  wthout  a  care- 
ful mixture  of  common  sense  and  experience  by  the 
buyer  and  seller  and  very  careful  consideration  of 
the  angle  which  will  have  the  greatest  effect  on  his 
own  business. 


104      THE  SCIENCE  OF  PURCHASING 

In  times  of  change  every  buyer  should  carefully 
consider  whether  his  industry  is  completely -read- 
justed or  is  only  in  the  process  of  readjustment. 
An  industry  which  has  been  actively  "  deflating  "  for 
from  twelve  to  eighteen  months  may  be  said  to  be 
reasonably  readjusted.  If  it  has  not  gone  through 
this  process  it  may  be  considered  to  be  still  unad- 
justed. 

Effect  of  Foreign  and  Speculative  Buyers. — In 
many  businesses  the  foreign  markets  and  world 
trade  and  conditions  are  as  necessary  to  watch  as 
are  those  at  home.  It  becomes  increasingly  appar- 
ent that  the  import  and  export  of  goods  have  a 
direct  effect  on  domestic  supply  and  prices.  We 
thus  realize  that  when  foreign  market  is  not  absorb- 
ing our  surplus  goods,  it  has  a  strong  influence  upon 
the  home  market  price  and  we  can  often  take  ad- 
vantage of  this  condition.  It  is,  therefore,  an  im- 
portant duty  of  a  purchasing  agent  carefully  to 
watch  the  present  and  future  trend  of  buying  and 
selling  in  foreign  countries  in  his  plans  involving 
our  own  present  and  probable  future  prices.  Care- 
ful study  of  foreign  trade  conditions  and  trends  is 
most  valuable  to  the  forelooking  purchasing  cap- 
tain. 

Another  angle  of  importance  to  the  purchasing  de- 
partment is  the  condition  of  the  speculative  market. 
It  should  realize  fully  the  power  of  the  speculative 
buyer  who  buys  and  holds  for  a  rise  during  the 
seller's  market.  In  such  markets,  prices  are  boosted 
overnight  and,  unless  a  proportionate  raise  can  be 


FUTURE  TRENDS  AND  FORECASTS  105 

made  in  the  selling  prices,  a  disastrous  condition  is 
created,  for  almost  any  business  which  must  buy  its 
materials  in  quantity,  hurriedly,  in  the  open  market, 
and  which  has  any  reasonable  competition.  Specu- 
lation in  commodities  is  not,  of  course,  nearly  so 
important,  where  the  prices  and  market  are  stagnant 
or  declining;  but,  where  the  market  is  beginning  to 
pick  up  and  quantities  are  in  demand,  even  if  their 
prices  do  not  rise  rapidly,  the  speculative  element 
will  have  an  effect  on  the  market,  and  therefore 
should  be  watched  carefully  and  arranged  for  in  ad- 
vance by  the  astute  purchasing  agent. 

The  Purchasing  Agent's  Forecast. — The  buyer 
for  a  big  company  certainly  has  a  man's  job  in  it- 
self in  coordinating  and  fulfilling  all  the  needs  of 
an  organization,  for  which  he  may  be  expected  to 
buy  anything  from  a  pencil  to  a  pachyderm.  Any 
purchasing  agent  should  not  be  blamed  if  he  thinks 
his  job  is  difficult  enough  as  it  is,  and  that  anybody 
who  suggests  that  he  have  "second  sight,"  or  be  a 
"forecaster,"  is  asking  too  much  at  four,  or  even 
five,  figures  a  year.  He  believes  he  should  not  be 
expected  to  take  another  job  on  top  of  his  regular 
man's  size  work;  some  agency  should  compile  a  fore- 
cast of  the  trend  of  business  in  such  a  plain  and 
simple  manner  that  it  can  be  applied  without  any 
elaborate,  or  fancy,  instruments,  or  "high-brow" 
thinking.  It  is  a  service  that  should  be  undertaken 
by  the  Government — but  if  not  by  some  private 
agency  which  can  profitably  give  the  time  to  this 
work.  It  appears  certain  that  it  will  be  more  simply 


106      THE  SCIENCE  OF  PURCHASING 

and  practically  worked  out  in  years  to  come  than  it 
has  ever  been  before.  In  fact,  the  Department  of 
Commerce  is  now  much  interested  in  the  proposal  to 
assemble  certain  figures  along  future  trends,  or  fore- 
cast lines,  for  the  assistance  of  American  business 
men. 

Generally  speaking,  the  making  of  a  forecast 
should  be  done  on  this  formula:  Take  the  best 
available  forecast  service  supplied  by  experts,  cover- 
ing general  business  conditions;  rate  this  60  per 
cent ;  then  get  some  index  figure  indicating  the  com- 
parative situation  in  your  industry  as  a  whole,  and 
rate  this  30  per  cent ;  then  analyze  the  conditions  of 
your  own  individual  business  and  rate  this  10  per 
cent.  These  three  factors  (general,  industrial  and 
individual)  properly  combined  will  provide  a  com- 
bination index  figure  very  accurately  representing 
your  situation. 

Fundamental  Factors  on  Business  Forecast. — Few 
business  men  realize  the  value  to  them  of  some 
simple  method  of  checking  up  present  and  future 
general  business  conditions,  based  upon  fundament- 
als which  are  practically  agreed  upon  by  all  experts 
as  closely  indicating  the  business  situation.  Such 
analysis  is  of  so  great  value  to  any  executive  that  a 
set  of  fundamental  factors,  showing  their  relation 
to  general  business  conditions,  is  herewith  given  in 
detail.  This  will  illustrate  how  such  "  check-up " 
knowledge  can  be  visualized  by  business  men.  A 
graphic  chart,  designed  by  a  business  research 
organization,  for  its  clients,  will  be  analyzed  to  illus- 


FUTURE  TRENDS  AND  FORECASTS  107 

trate  how  the  trend  of  general  conditions  affects 
individual  businesses.  Through  individual  knowl- 
edge of  his  trade,  and  of  how  much  or  how  little 
these  general  conditions  affect  it,  a  business  execu- 
tive adapts  such  data  to  his  individual  case. 

We  will  herein  briefly  discuss  the  different  fac- 
tors which  have  been  picked  out  -as  fundamental  by 
this  business  barometer  service,  taking  it  for  granted 
that  they  have  been  carefully  studied,  and  that  they 
are  fundamental  and  have  a  strong  effect  on  practi- 
cally every  business. 

The  usual  arithmetic  chart  plan  is  not  used,  be- 
cause the  line  graph  is  limited,  and  only  a  few  lines 
can  be  graphically  and  understandingly  handled  on 
one  chart.  In  the  dial  here  given,  twelve  fundamental 
factors  are  shown,  and  both  their  temporary,  or 
monthly,  movement,  and  their  past  record  of  twelve 
months  compared  to  five  years,  is  clearly  illustrated. 
This  plan  allows  not  only  the  view  of  the  vital 
factors  as  a  whole,  but  the  application  to  an  indi- 
vidual business  of  conditions  in  factors  particularly 
affecting  it.  To  fulfill  these  conditions,  it  was 
necessary  to  design  a  new  style  of  chart  divided  up 
into  twelve  factors,  showing  both  monthly  and 
yearly  movements  and  also  comparative  averages. 

These  individual,  fundamental  factors  are 
arranged  in  general  groups,  each  of  which  illustrates 
certain  business  conditions,  and  trends.  The  first 
seven  factors  largely  affect  general  confidence.  The 
next  four  illustrate  general  business  conditions  and 
markets.  The  last  factor  best  pictures  general 


108      THE  SCIENCE  OF  PUECHASING 

conditions.  By  combining  the  per  cent  of  all  the 
factors,  the  month's  changes  and  also  the  year's 
changes  against  the  five-year  average  are  shown. 
Below  the  chart  are  two  tables,  one  showing  the 


ito* 

Courtesy  of  Business  Bourse,  New  York. 

FIQ.  1. — TWENTIETH  CENTUBY  HISTORY  DIALS,  SHOWING  FLUCTUATION 
OF  COMPOSITE  CONDITIONS    (1901-1912). 

comparison  of  conditions  of  each  of  the  twelve 
factors  for  the  current  month  as  against  the  same 
month  of  one  year  ago;  the  other,  the  twelve  com- 


FUTUBE  TEENDS  AND  FORECASTS  109 

bined  factors  compared  to  their  combined  monthly 
record  for  the  twelve  preceding  months. 

What  the  Twelve  Factors  of  the  Dial  Represent.— 
The  fundamental  character  of  each  of  the  factors  of 


1»24 


me 

Courtesy  of  Business  Bourse,  New  York. 

FIG.  2. — TWENTIETH  CENTUBY  HISTOBY  DIALS,  SHOWING  FLUCTUATION 

OF   COMPOSITE  CONDITIONS     (1913-1922). 

the  dial  are  apparent  to  any  one  studying  the  same, 
but  the  underlying  and  far-reaching  illustrations  of 
their  effect  on  business  and  buying  are  not  always 


110      THE  SCIENCE  OF  PURCHASING 

eo  obvious.  Therefore,  some  of  the  important  bear- 
ings of  these  factors  upon  business  in  general  will 
be  pointed  out. 

No.  I,  Railroad  Earnings,  not  only  shows  the 
monthly  trend  and  comparative  yearly  conditions 
of  the  gross  earnings  of  the  railroads  of  the  country, 
but  also  illustrates  similarly  the  conditions  of  the 
business  of  the  country  moving  by  rail,  which,  of 
course,  constitutes  the  number  of  passengers  and  the 
shipment  of  goods  by  firms  or  individuals.  It  is  the 
first  of  the  seven  general  confidence  factors  shown 
on  the  dial,  and  indicates,  by  the  arrow  pointing  out- 
ward, that  the  current  month's  figures  were  higher 
than  those  of  the  preceding  month's  dial  by  0.4 
per  cent — a  slight  upward  trend.  The  averages 
for  the  twelve  months  (including  the  current  month 
each  time),  compared  with  <the  last  sixty  months 
(including  the  current  month),  show  the  gross  rail- 
road business  with  still  two  10  per  cent  segments 
outside  the  five-year-average  line;  that  is,  21  per 
cent  over  the  average  yearly  gross  for  the  past  five 
years.  The  arrow  and  shaded  area  both  show  this 
factor  to  be  a  "positive"  one  in  the  general  con- 
fidence group. 

No.  II,  Bank  Clearings,  obviously  illustrates  the 
checking  business  of  the  banks.  When  it  is  remem- 
bered that  this  largely  consists  of  payments  in  buy- 
ing and  selling  transactions,  it  is  realized  that  this 
record  shows  how  the  trade  winds  blow  and  is  an 
important  barometer  of  general  confidence.  In  the 
dial  chart  the  arrow  shows  a  minus  4  per  cent  drop 


FUTUEE  TRENDS  AND  FOEECASTS  111 

over  the  preceding  month's  record,  and  the  shaded 
area  indicates  that  the  average  is  a  fraction  of 
1  per  cent  below  the  five-year  normal.  The  record, 
therefore,  shows  that  this  is  a  negative  factor  for  the 
month  and  for  twelve  months.1 

No.  Ill,  Bank  Balances,  is  in  the  positive  column, 
for  the  month,  with  the  arrow  pointing  outward  for 
+0.2  per  cent.  The  shaded  area  also  shows  16  per 
cent  plus,  indicating  a  more  substantial  average 
by  that  per  cent  for  the  twelve  against  the  sixty 
months — a  positive  factor  and  one  of  importance  to 
the  business  and  financial  world. 

No.  IV,  Bond  Sales,  is  a  particularly  significant 
general  confidence  factor,  as  it  is  well-known  that  the 
best-informed  bond-buyers  buy  on  improving  times; 
and  when  bonds  are  appreciating  and  obtainable,  in- 
terest return  is  decreasing.  An  active  bond  market, 
except  where  they  are  being  thrown  over  at  a  loss, 
is  indicative  of  cheapening  money  and  of  partially 
improving  times.  The  dial  shows  this  factor  as 
substantially  positive. 

No.  V,  Stock  Sales,  although  18  per  cent  below  the 
five-year  average,  as  shown  by  the  shaded  area,  is 
inside  the  five-year  line,  yet  shows  the  "bulge," 
"not  boom,"  predicted  in  the  dial  last  spring  as  due 
at  this  time.  The  stock-market  factor  is  a  particu- 
larly sensitive  indicator  of  general  confidence,  even 

1  Debits  against  personal  balances  are  advocated  by  some 
authorities  as  a  correct  illustration  of  this  phase  of  business. 
The  records  of  this  latter  factor  have  not  been  codified  over  a 
term  of  years  and  are,  therefore,  not  available  for  long  per- 
spective, or  comparison,  as  are  bank  clearings. 


112      THE  SCIENCE  OF  PURCHASING 

registering  changes  in  business  conditions  months 
in  advance.  It  is  one  of  the  factors  worthy  of 
careful  study  by  the  purchasing  agent.  The  dial 
shows  this  factor  in  the  positive  column  for  the  last 
three  months  wi'th  an  indication  of  its  continued, 


Covrtety  of  Business  Bourse,  New  fork. 

FlO.    3. — A    CHART    OF    BUSINESS    CONDITIONS   AND   TRENDS. 

steady,  though  rather  slow,  improvement  as  a  whole. 

No.  VI,  New  Securities,  is  designated  as  one  of  the 

two  general  confidence  result  factors  illustrating,  to 

a  considerable  degree,  the  trend  of  general  confi- 


FUTURE  TRENDS  AND  FORECASTS  113 

dence.  It  is  quite  generally  known  that  the  banking 
interests,  which  float  the  great  majority  of  new  is- 
sues, put  them  out  only  when  they  have  knowledge 
tending  to  indicate  that  the  banks  and  the  public  are 
in  a  mood  to  subscribe  freely.  Therefore,  the  +48 
per  cent  monthly  arrow  and  the  +19  shaded  area 
(beside  the  +42  shown  in  the  table  of  comparisons 
with  same  month  last  year)  make  a  strong  +  show- 
ing for  this  important  indicator  of  general  con- 
fidence. 

No.  VII,  New  Building,  fluctuates  somewhat  sea- 
sonably, but,  as  a  whole,  is  an  important  indication 
of  general  confidence  in  both  business  and  personal 
affairs.  Shortage  of  housing  may  affect  volume,  as 
building  extensive  factory  additions  increased  this 
factor  in  the  war-boom  period;  but,  whenever  this 
factor  is  expanding,  it  not  only  shows  general  con- 
fidence, at  least  on  the  part  of  the  building  trade, 
but  also  has  a  strong  influence  on  general  business 
conditions  and  confidence.  The  dial  arrow  shows  a 
— 5  per  cent  recession  over  the  big  seasonal  figure 
for  the  previous  month,  but  the  twelve  month  area 
shows  next  to  the  biggest  of  all  shaded  areas  of  the 
dial  and  the  current  month  is  +24  over  the  same 
month  of  the  last  year.  This  is  a  positive  final 
factor  in  /the  general  confidence  group. 

No.  VIII,  Crops,  forms  one  of  the  group  of  the 
next  four  factors  which  strongly  affect  business 
conditions,  as  factors  VIII,  IX  and  X  form  the  bulk 
of  the  market  for  all  commodities  handled  by  busi- 
ness. If  the  crops  are  favorable,  it  follows  that  the 


114      THE  SCIENCE  OF  PURCHASING 

farmer's  buying  power  will  be  big  and  will  help 
"  business  conditions, "  and  the  reverse  is  true 
where  crops  are  poor.  At  this  time  there  are  no 
regular,  reliable  crop  statistics  which  can  be  used 
for  monthly  change  average,  so  only  yearly  changes 
are  noted  on  the  dial,  but  crop  conditions  are  covered 
in  the  discussion  of  the  factors ;  conditions  are  now 
only  "fair,"  with  prices  unsatisfactory,  making  a 
negative  showing. 

No.  IX,  Exports,  is  coming  to  be  generally  recog- 
nized as  a  big  factor  in  business  conditions,  as  the 
sending  abroad  of  our  surplus  merchandise  has  a 
great  effect  in  allowing  the  balance  to  be  sold  at  home 
at  a  profit.  Therefore,  the  foreign,  together  with 
farm  and  labor  purchasing-power,  are  the  deciding 
factors  in  business  conditions.  Exports,  although 
below  the  five-year  high  average,  are  fairly  active 
with  a  +35  per  cent  in  the  year's  changes  table  over 
the  same  month  last  year.  This  factor  is  fairly 
favorable. 

No.  X,  Labor  Conditions,  represents  employment 
which,  in  turn,  determines  the  buying  power  of  this 
large  class,  constituting  one  of  the  big  backgrounds 
for  business.  The  arrow  shows  slightly  increased 
employment,  but  -the  shaded  area  shows  that  employ- 
ment is — 19  per  cent  below  the  five-year  average, 
and  also  shows  that  the  third  big  "  business  condi- 
tions "  factor  is  in  need  of  improvement,  indicating, 
or  proving,  as  you  prefer,  the  unsatisfactory  con- 
dition of  business  and  that  its  improvement  can  be 
coincident  only  with  the  betterment  of  these  three 


FUTUEE  TRENDS  AND  FORECASTS  115 

big  factors  which  underlie  its  very  existence:  the 
purchasing  power  of  the  farmer;  labor  conditions; 
and  foreign  trade. 

No.  XI,  Failures,  is  designated  in  the  dial  as 
the  business  conditions  result  factor,  as  failures 
most  truly  mirror  the  condition  of  trade.  When 
trade  is  ailing,  or  even  " convalescing/'  the  failure 
"  temperature "  is  high,  and  the  arrow  and  shaded 
area  of  this  factor  are  therefore  very  important,  as 
they  indicate  the  condition  and  trend  of  health  in  the 
business  body.  The  shaded  area  shows  that  busi- 
ness, as  a  whole,  has  been  very  sick  for  the  past 
twelve  months — 61  per  cent  more  failures  than 
the  average  for  the  past  sixty  months.  The  monthly 
arrow,  however,  shows  5  per  cent  less  failures  than 
in  the  preceding  month,  which  trend,  when  main- 
tained for  two  or  three  months,  indicates  definitely 
that  business  conditions  have  * '  turned  the  corner. ' ' 

No.  XII,  Commodity  Prices,  is  placed  as  the  final 
and  most  important  factor  in  the  dial,  because  the 
condition  of  commodities  directly  touches  a  larger 
number  of  the  people,  in  and  out  of  business,  than 
any  other  factor.  It,  in  fact,  more  directly  and  con- 
clusively indicates  general  conditions,  than  could  any 
other  factor.  In  the  last  few  dial  charts,  this  was 
forcibly  brought  to  the  public's  attention  for,  since 
the  arrow  of  Factor  XII  on  the  dial  started  again  to 
point  upward  (outward)  in  July,  1921,  business 
"  found  itself, "  and,  as  the  commodity  factor  re- 
mained positive  month  after  month,  it  became  more 
and  more  stabilized.  The — 33  per  cent  shaded  area 


116      THE  SCIENCE  OF  PURCHASING 

of  this  factor  evidenced  the  serious  business  ills  of 
the  previous  twelve  months,  which  may  be  expected 
to  continue  to  have  its  effect  on  general  conditions 
until  it  gradually  recedes,  as  better  months  over- 
come the  bad  performances  of  the  past,  and  until  this 
shaded  area  again  appears  outside  (above)  the  five- 
year  average  line.  When  this  occurs,  general  con- 
ditions again  will  have  reached  the  only  practical 
"normal" — an  average  over  a  reasonable  term  of 
years,  not  too  long  to  lose  its  relativity  and  effect,  and 
not  too  short  to  take  into  account  and  reflect  the 
averages  and  swings  of  a  business  period  in  which 
underlying  changes  have  not  been  too  great. 

In  respect  to  the  ups  and  downs  of  commodity 
prices,  properly  illustrating  general  conditions,  it 
has  been  pointed  out  that  a  33  per  cent  drop  in  prices 
from  the  abnormalities  of  inflation  was  beneficial, 
but  a  fall  in  business  temperature  did  not  make  the 
business  patient  any  stronger  while  the  "fever"  was 
being  reduced;  business  felt  sick  and  was  sick  during 
this  necessary  process,  and,  as  illustrated  on  this 
chart,  is  only  convalescing  and  gradually  regaining 
its  average  strength  and  vigor.  We  may  all  decry 
rising  commodity  prices,  but  when  they  are  going  up 
there  is  no  doubt  that  general  conditions  are  good,  at 
that  time,  and  will  continue  to  be  so  as  long  as  prices 
continue  ascending,  and  business  and  buyers  may  act 
accordingly. 

The  above  reasoning  does  not  aim  to  advocate  in- 
flation, or  advise  against  proper  deflation,  but  merely 
points  out  the  effect  of  increasing  or  decreasing 


FUTURE  TRENDS  AND  FORECASTS  117 

prices  on  conditions  in  general.  A  stability  around 
"normal"  is,  without  question,  the  ideal  condition  in 
commodity  prices  for  the  stabilization  and  "long 
pull"  benefits  for  general  business  and  personal  con- 
ditions. This  factor  is  a  most  important  one  for  the 
purchasing  department  to  consult  in  its  estimate  of 
general  conditions.  • 

Composite  Monthly  and  Yearly  Changes. — It  is 
always  well  to  take  a  " consensus, "  or  bird's-eye 
view,  of  the  general  situation,  in  addition  to  examin- 
ing the  details.  This  the  dial  recognizes  in  the 
composite  figures  of  all  twelve  factors,  showing  the 
monthly  change  of  all  factors,  +8.0  per  cent  and  the 
yearly  composite  conditions  of  the  twelve  factors, 
— 1.1  per  cent. 

It  is  often  valuable  to  get  the  perspective  as  to 
what  was  doing  at  this  season,  or  month,  one  year 
ago,  and  thus  allow  comparison  with  relative  con- 
ditions in  an  individual  business,  or  weigh  plans 
proportionately  as  to  how  some  underlying  business 
factors,  or  average  of  factors,  show  as  to  propor- 
tionate position  now  and  then.  This  comparison 
can  be  made  readily  from  comparative  tables,  such 
as  are  shown  at  the  bottom  of  the  dial. 

On  the  accompanying  twentieth  century  history 
dials  are  tersely  analyzed  the  general  business  record 
and  trend  all  the  way  back  to  1900,  which  should  be 
valuable  in  studying  long  swings. 


CHAPTER  X 
LEGAL  SIDE  OF  CONTRACTS 

Need  for  a  Knowledge  of  Contract  Laws. — Broadly 
speaking,  laws  are  rules  of  conduct  established  by 
an  authority,  statute  or  decree,  controlling  the  be-- 
havior  of  those  individuals  residing  within  the  com- 
munity or  state  in  which  such  rules  may  be  enforced. 
Primarily,  it  is  the  business  of  the  lawyer  to  decide 
what  is  legal  and  what  is  illegal.  However,  it  is 
not  only  possible,  but  essential,  for  the  business  man 
to  possess  a  basic  knowledge  of  business  law.  All 
business  endeavor  must  be  built  upon  legal  statutes 
and  practically  all  business  law  is  built  upon  con- 
tracts. All  work  of  buying  has,  as  its  basis,  an  oral 
or  written  contract. 

It  is,  therefore,  of  paramount  importance  that  the 
purchasing  executive,  whose  ambition  it  is  to  ad- 
vance in  his  profession,  inform  himself  as  to  his 
rights  and  liabilities  and  the  rights  and  liabilities  of 
others  in  all  matters  pertaining  to  the  purchase  of 
materials  and  supplies.  With  this  knowledge,  he 
will  effect  a  saving  for  his  concern  in  legal  fees  and 
litigations,  and  will  be  able  to  enter  into  a  contract 
with  the  seller  that  will  hold.  The  signature  of  an 
authorized  purchaser  affixed  to  a  contract  binds  the 

118 


LEGAL  SIDE  OF  CONTEACTS         119 

authorizing*  company  for  the  amount  of  the  contract 
and  the  stipulations  therein.  Knowing  this,  the 
wise  purchaser  will  make  it  a  point  to  know,  also, 
the  essential  requirements  in  forming  a  contract; 
when  contractual  relations  actually  exist;  when  and 
how  an  agreement  may  be  canceled;  when  the  seller 
may  be  forced  to  live  up  to  his  part  of  an  agreement ; 
etc.,  etc. 

Especially  in  after-war  times,  when  strong  temp- 
tations arose  in  a  falling  market,  to  cancel  and  dis- 
honor contracts,  has  there  been  need  of  basic  legal 
comprehension  by  purchasing  executives. 

First  Requirement  of  the  Purchasing  Executive.— 
There  should  be  no  need  of  emphasizing,  or  even  of 
mentioning,  the  legal  requirement  that  all  docu- 
ments must  be  read  carefully  before  signing.  Yet 
this  simple  provision  is  so  frequently  violated  by 
purchasing  executives  and  business  men  in  general 
that  attention  is  called  to  this  point.  Ignorance  of 
the  law  is  never  accepted  by  the  court  as  an  excuse. 
The  business  man  who  is  capable  of  entering  into 
contractual  relations  is  assumed  to  be  capable  of 
knowing  all  conditions  contained  in  the  agreement  he 
has  signed.  Ignorance  of  those  conditions,  provid- 
ing they  have  been  clearly  stated  in  the  body  of  the 
contract,  does  not  excuse  either  party  to  the  con- 
tract for  failure  to  perform  his  part  of  the  agree- 
ment as  stated  in  the  contract.  If  this  were  not  so, 
the  whole  framework  upon  which  law  is  built  would 
fall  under  the  worthlessness  of  contracts.  The 
United  States  court,  in  deciding  a  leading  case,  holds 


120      THE  SCIENCE  OF  PURCHASING 

that  "a  contractor  must  stand  by  the  word  of  his 
contract,  and  if  he  will  not  read  what  he  signs,  he 
alone  is  responsible. " 

In  a  case  in  a  western  court  where  a  party  to  a 
contract  endeavored  to  "wriggle  out,"  the  judge 
told  the  defendant  to  "meet  his  contract  like  a 
sport. ' '  The  standards  of  business  honor  as  well  as 
the  principles  of  law  are  against  "  welching "  on  a 
contract,  no  matter  what  the  provocation,  whether 
of  sheer  self-interest  or  of  negligence  in  grasping 
the  full  provisions  of  a  contract.  In  China,  large 
merchants  do  millions  of  dollars'  worth  of  business 
on  oral  contracts ;  they  consider  their  word  as  sacred 
as  a  written  contract. 

Law  of  Contracts. — A  contract  is  an  agreement 
between  two  or  more  parties  by  which  reciprocal 
rights  and  obligations  are  created.  One  party 
acquires  a  right,  enforceable  at  law,  to  some  act  or 
forbearance  from  the  other  who  is  under  a  cor- 
responding obligation  to  thus  act  or  forbear.  A 
contract,  to  be  binding  and  enforceable  at  law,  must 
contain  the  following  essential  elements: 

1.  A  certain  thing  to  be  done  or  not  to  be  done 
must  constitute  the  subject  matter. 

2.  There  must  be  a  meeting  of  the  minds  of  the 
parties  upon  subject  matter  and  terms,  with 
mutual  obligations,  and  usually  to  be  performed 
within  a  specified  time. 

3.  There  must  be  a  consideration. 

4.  All  parties  must  be  competent  to  enter  into  the 
contract. 


LEGAL  SIDE  OF  CONTRACTS         121 

Generally  speaking,  all  contracts  which  are  made 
between  two  competent  parties  for  a  proper  con- 
sideration, without  fraud  or  imposition  and  for  law- 
ful purposes,  are  enforceable  at  law.  The  parties' 
consent  must  not  be  the  result  of  fraud  or  imposi- 
tion, or  the  contract  may  be  avoided  by  the  party 
imposed  upon.  The  acceptance  of  one  party  must 
meet  the  offer  of  the  other  party  according  to  the 
terms  offered. 

The  Consideration.— A  contract  is  a  bargain  or 
agreement  between  two  or  more  parties,  insuring 
good  faith  in  the  making  of  a  promise.  A  promise 
is  a  contract  only  when  given  in  return  for  some- 
thing accepted  in  consideration  of  that  promise. 
Therefore,  the  giving  of  the  promise  and  the  con- 
sideration must  be  simultaneous.  A  promise  given 
before  the  consideration  merely  constitutes  an  offer. 

A  consideration  is  defined  as  something  of  value 
that  is  either  received  by  one  party  or  given  up  by 
the  other;  a  forbearance  or  detriment  or  a  giving 
up  of  something  one  is  not  bound  to  give.  No  con- 
tract is  enforceable  at  law  unless  it  rests  upon  a 
consideration,  but  the  court  of  equity  does  not  con- 
cern itself  with  the  adequacy  of  the  consideration, 
so  long  as  it  is  neither  fraudulent  nor  an  imposition 
upon  one  of  the  parties.  The  promisee  must  give 
something  of  more  or  less  value  for  the  promisor's 
undertaking,  but  it  need  not  be  anything  obviously 
for  the  promisor's  benefit.  His  acceptance  shows 
that  he  sets  some  value  upon  it,  and  that  it  is  of  some 
value,  either  expressed  or  implied,  is  all  that  the 


122      THE  SCIENCE  OF  PURCHASING 

court  demands.  The  consideration  need  not  be  any- 
thing capable  of  delivery  or  of  possession.  It  may 
be  a  promise  to  pay  money  or  to  deliver  goods,  or 
it  may  be  to  do  work  or  otherwise  to  act,  or  not  to 
act,  in  some  specific  way. 

Contractual  relation  does  not  exist  between  the 
contracting  parties  nntil  the  giving  of  a  promise  in 
return  for  something  accepted,  in  consideration  of 
that  promise. 

Meeting  of  Minds.— The  courts  have  ruled  that 
there  must  be  a  meeting  of  the  minds  of  the  con- 
tracting parties  else  there  can  be  no  contract.  Ac- 
ceptance of  an  offer  constitutes  a  binding  contract, 
providing  that  acceptance  is  in  accord  with  the  offer, 
in  subject  matter  in  terms.  A  conditional  or  quali- 
fied acceptance  is  only  a  new  proposal  and,  as  such, 
must  in  turn  be  accepted  in  order  to  form  a  contract. 
In  case  of  the  failure  of  the  acceptance  to  correspond 
with  the  offer  due  to  misinterpretation  of  the  sub- 
ject matter  or  terms,  no  contract  has  been  formed. 
There  are  many  cases  in  the  court  records  wherein 
one  party  to  a  contract  has  brought  suit  against 
the  second  party  for  failure  to  fulfill  his  part  of 
the  contract.  The  evidence  in  a  large  percentage 
of  these  cases  shows  misunderstanding  of  the  sub- 
ject matter  or  terms.  The  law  says  that,  in  the 
absence  of  precise  agreement,  no  contract  exists  and, 
therefore,  the  party  being  sued  is  not  liable  to  dam- 
age for  failure  to  perform.  In  all  such  cases,  the 
court  takes  into  consideration  the  original  true  in- 
tentions of  the  parties  and,  if  the  offer  does  not  ex- 


LEGAL  SIDE  OF  CONTRACTS         123 

press  the  intentions  clearly  and  correctly,  relief  from 
the  mistake  is  given  or  the  faulty  document  may  be 
judicially  rectified. 

The  purchasing  executive  who  sees  to  it  that  his 
offers  are  so  worded  as  to  be  impossible  of  misinter- 
pretation by  reasonable  men  will  save  his  firm  from 
frequent  losses  due  to  mistakes.  The  seller  who 
makes  sure  that  he  understands  the  true  intention  of 
the  purchaser  before  accepting  the  offer  will  be  com- 
paratively free  from  expensive  suits  resulting  from 
misunderstanding.  Both  parties  to  the  contract 
should  use  simple  language  and  should  refuse  to  ac- 
cept contracts  containing  expressions  and  phrases 
not  fully  comprehended. 

Communication  of  Acceptance. — It  is  the  custom 
of  some  concerns,  whose  system  of  record  requires 
it,  to  demand  a  written  acceptance  of  all  offers. 
Generally,  in  such  cases,  a  form  of  some  sort  is 
inclosed  with  the  offer  to  buy,  suitably  spaced  for  the 
seller's  acknowledgment.  But  an  offer  may  be  well 
accepted  by  any  act  clearly  referable  to  the  proposed 
agreement,  such  as  shipping  all  or  part  of  the  goods 
mentioned  in  .the  offer  and  the  forwarding  of  the 
bill  of  lading  or  invoice.  Further  communication  is 
not  required  as  a  matter  of  law. 

Where  a  seller  offers  goods  before  there  is  a  bind- 
ing contract,  there  must  be  an  acceptance.  Unless 
especially  directed  as  to  the  method  of  communicat- 
ing acceptance,  the  acceptor  may  mail  or  telegraph 
his  acceptance. 

The  legal  principle  deciding  the  question  of  how 


124      THE  SCIENCE  OF  PURCHASING 

long  an  offer  is  open  in  the  absence  of  a  time  limit 
for  acceptance  hold  that  a  reasonable  time  may 
elapse.  What  is  considered  a  reasonable  time  is 
decided  by  the  facts  in  the  case.  An  oral  offer  made 
without  setting  a  time  for  its  acceptance  is  consid- 
ered as  having  lapsed  with  the  separation  of  the 
parties  without  acceptance.  An  offer,  made  by  tele- 
graph, implies  immediate  acceptance  by  wire,  unless 
otherwise  stated.  An  acceptance  requested  by  re- 
turn mail  does  not  necessarily  mean  the  very  next 
day  but  on  the  day  of  receipt  of  the  offer. 

The  most  satisfactory  method  for  all  buyers  and 
sellers  is  to  state,  on  all  offers  or  letters  concerning 
the  transfer  of  materials,  the  date  upon  which  ac- 
ceptance must  be  made. 

Competence. — The  law  requires  that  all  parties  to 
a  contract  must  be  capable  of  entering  into  con- 
tractual relations.  Business  law  requires  that  the 
parties  be  executives,  or  authorized  representatives 
of  the  executives,  of  (the  respective  companies  de- 
sirous of  forming  contracts  with  each  other.  The 
purchasing  executive  should  be,  and  iii  most  modern 
business  houses  is,  the  authorized  representative  of 
his  firm  in  all  matters  relating  to  the  buying  of 
materials  and  supplies.  There  are,  however,  even 
in  progressive  houses,  purchasing  agents  who  are 
dependent  upon  the  signature  or  approval  of  some 
one  " higher  up"  for  the  validating  of  all  contracts 
above  a  certain  stipulated  limit  of  expenditure. 
With  the  advance  of  the  purchasing  profession  such 
hampering  of  the  man  in  charge  of  the  purchasing 


LEGAL  SIDE  OF  CONTRACTS         125 

department  is  gradually  being  rectified,  and  con- 
tracts, even  in  discussions  with  the  managing  direc- 
tors, are  signed  by  the  purchasing  executive. 

Many  of  the  larger  corporations  whose  purchasing 
executives  are  burdened  with  more  work  than  is 
humanly  possible  to  accomplish,  authorize  the  as- 
sistant purchaser  to  sign  certain  classes  of  orders; 
but  even  then  it  is  customary  for  him  to  sign  the 
name  of  the  purchasing  executive  instead  of  his  own. 
The  assistant,  as  a  rule,  takes  complete  charge  of 
the  purchasing  department  in  the  absence  of  the  pur- 
chasing executive,  but  his  authority  to  sign  orders 
remains  in  the  hands  of  the  real  head  of  the  depart- 
ment, or  some  one  "higher  up"  whose  approval 
should  be  obtained. 

Validity  of  Oral  Contracts.— Some  purchasing  ex- 
ecutives have  an  exaggerated  idea  of  their  safety, 
so  long  as  they  do  not  put  their  contracts  in  writ- 
ing or  enter  into  any  communication  about  them. 
1   The  purpose  of  the  written  contract  is  to  make  the 
\  terms  and  conditions  certain.    Oral  testimony  is 
not  allowed  to  vary  written  contracts  in  any  way. 
Contracts  in  general  are  equally  valid  whether  made 
orally  or  in  writing.    A  partial  payment  offered  by 
the  purchaser  and  accepted  by  the  seller,  or  repre- 
sentative of  the  seller,  binds  the  seller  to  a  ver- 
bal  agreement,   providing   the   payment   is   made 
in  currency  and  with  a  clear  understanding  be- 
tween the  parties  as  to  the  purpose  of  the  money 
paid. 
Certain  classes  of  contracts  are  required,  in  most 


126      THE  SCIENCE  OF  PURCHASING 

states,  to  be  attested  by  a  note  or  memorandum  in 
writing,  signed  by  the  party  or  his  agent  sought  to 
be  held  liable.  Some  of  the  provisions,  which  are 
adopted  from  .the  Old  English  Statute  of  Frauds  en- 
acted during  the  reign  of  Charles  II,  vary  in  some 
states,  but  the  following  contracts  very  generally 
are  required  to  be  attested : 

1.  Contracts  by  their  terms  not  to  be  performed 
within  a  year  from  the  date  of  the  making 
thereof. 

2.  A  promise  to  answer  for  the  debt,  default  or 
miscarriage  of  another  person. 

3.  Contracts  for  the  sale  of  goods  above  a  cer- 
tain value,  unless  a  portion  of  the  price  is  paid 
or  a  part  of  the  goods  has  been  delivered.     The 
required  value  of  the  goods  sold  varies  in  dif- 
ferent states  from  $30  to  $500.    In  a  number  of 
states    where   no    such   provision    exists    the 
amount  is  $50  which  is  the  required  value  of 
the  goods  demanding  written  contract  under 
the  Old  English  Statute  of  Frauds. 

Failure  to  Perform  Agreement. — During  the 
World  War,  when  unprecedented  conditions  ob- 
tained, sellers  were  prevented  from  filling  their  con- 
tracts through  lack  of  men  and  materials ;  shipments 
refused  by  carriers  or  diverted  from  destination 
by  the  government;  precedence  of  war  orders,  etc. 
The  law  provides  relief  for  a  contracted  party  whose 
failure  to  perform  what  he  has  agreed  is  by  an 
''act  of  God  or  the  public  enemy. "  This  law  says, 


LEGAL  SIDE  OF  CONTRACTS        127 

in  effect,  that  a  party  is  generally  excused  for  the 
failure  to  perform  what  he  has  agreed,  only  by 
agencies  beyond  his  control,  except  in  cases  involv- 
ing a  personal  element  in  the  work  to  be  performed, 
such  as  the  rendition  of  services  when  death  or 
sickness  of  the  party  contracting  to  perform  is  a 
valid  excuse.  Sellers,  and  there  were  many  of  them 
during  the  war,  were  forced  to  take  advantage  of 
this  protective  clause.  In  case  of  suit,  the  court 
ruled  that  the  purchaser  was  not  entitled  to  damages 
where  reasons  for  failure  were  clearly  beyond  con- 
trol. 

In  cases  where  the  carrier  refused  to  accept  ship- 
ments, the  seller  was  not  held  to  blame  for  his 
failure  to  deliver  goods.  Neither  was  the  purchaser 
whose  order  read  f .  o.  b.  shipping  point,  bound  to 
pay  invoices  merely  because  the  goods  were  ready 
for  shipment.  The  purchaser 's  liability  begins  only 
upon  the  acceptance  of  the  shipment  by  the  carrier. 
With  the  rendering  of  the  bill  of  lading  to  the  seller 
by  the  carrier,  the  seller  is  said  to  have  fulfilled  his 
part  of  the  contract  and  the  shipment  belongs  to 
the  purchaser  from  that  moment. 

If  the  purchasing  company  has  mailed  its  check 
in  payment  of  the  invoice  accompanying  the  bill  of 
lading,  and  the  goods  are  diverted  from  their  desti- 
nation for  government  purposes,  the  seller,  as  a 
rule,  is  required  to  return  the  amount  of  the  invoice 
to  the  purchaser.  He  may,  if  he  desires,  enter  into 
communication  with  the  purchaser  concerning  the 
replacement  of  the  shipment,  but  legally  he  is  re- 


128      THE  SCIENCE  OF  PURCHASING 

quired  only  to  return  the  money  paid  for  the  goods 
and  the  contract  is  considered  as  executed.  In  cases 
where  contracts  are  for  the  performance  of  work 
upon  a  specified  object,  its  destruction  without  the 
fault  of  the  party  sought  to  be  held  liable  is  suffici- 
ent excuse  for  the  failure  to  perform  what  has  been 
agreed.  There  are,  of  course,  exceptions  to  these 
rules. 

During  the  war,  there  were  many  concerns,  some 
of  them  supposedly  dependable  sources  of  supply, 
who  took  advantage  of  the  protective  clause  in  their 
contracts  without  true  cause.  It  frequently  hap- 
pened that  these  concerns,  whose  contracts  had  been 
made  before  the  upward  trend  of  the  market,  re- 
fused to  make  shipments  at  the  lower  price,  offering, 
as  an  excuse,  war  orders,  diverted  shipments,  etc. 
Purchasing  executives,  having  all  they  could  do  to 
keep  their  factories  supplied  with  materials,  could 
not  take  time  to  enter  suit  against  firms  whose  poli- 
cies allowed  of  their  hiding  behind  a  legal  phrase. 
Those  who  did  take  their  cases  to  court  found  that 
the  firms  repudiating  their  contracts  were  so  well 
fortified  by  the  wording  of  such  contracts  that 
breach  was  difficult  to  prove. 

With  the  cancellation  of  war  orders  and  the  re- 
turn of  something  like  normal  business  conditions, 
however,  purchasing  executives  were  overwhelmed 
with  offers  to  sell  materials  and  supplies.  Refer- 
ring to  their  revised  lists  of  dependable  sources  of 
supply,  the  purchasing  executives  gave,  and  will 
continue  to  give,  preference  to  those  sellers  whose 


LEGAL  SIDE  OF  CONTRACTS         129 

record  of  fair  play  and  upright  dealing  remained 
clean  during  the  war. 

Misrepresentation. — It  is  seldom  possible  for  the 
purchasing  executive  to  know  all  the  facts  about  the 
materials  he  is  called  upon  to  purchase.  Eeports 
from  the  manufacturing  department  on  tests,  analy- 
sis, performance,  etc.,  of  samples  are  helpful  and 
frequently  essential,  but  even  expert  tests  do  not 
give  all  the  facts.  The  purchasing  executive  must, 
therefore,  and  as  a  rule  he  reasonably  may,  take  the 
facts  from  the  seller,  verifying  these  facts  wherever 
possible. 

Misrepresentation  of  facts  by  one  party  is  gen- 
erally considered  as  an  imposition  upon  the  other 
party,  and,  as  such,  enables  the  one  imposed  upon 
to  avoid  the  contract.  An  untrue  statement  made 
by  the  seller,  even  though  he  believed  it  to  be  true 
at  the  time  of  contracting,  is  frequently  classed  as 
misrepresentation.  Inadvertent  omission  of  a  ma- 
terial fact  is,  in  some  cases,  misrepresentation. 
Misdescription  of  property  on  sale,  without  fraud, 
may  be  a  matter  for  compensation  or  for  the  setting 
aside  of  the  contract,  depending  upon  the  impor- 
tance of  the  point  wrongly  described.  When  the 
validity  of  the  contract  is  conditional  upon  the  ex- 
istence of  any  matter  of  fact,  and  the  fact  is  not 
as  stated,  the  contract  has  no  force. 

The  misrepresentation  of  facts  is  important  at 
all  times  but  especially  so  in  the  matter  of  purchas- 
ing goods  through  samples.  All  samples  should  be 
subjected  to  analysis  or  physical  tests,  and  goods 


130      THE  SCIENCE  OF  PURCHASING 

received  on  order  should  be  submitted  to  the  same 
tests  and  carefully  checked  with  the  report  on  sample. 
There  must  be  no  substantial  difference  between 
shipment  and  sample.  The  validity  of  the  contract 
between  the  purchaser  and  the  seller  is  conditional 
upon  the  goods  received  being  neither  higher  nor 
lower  in  quality  and  in  no  way  different  from  the 
sample  submitted.  If  these  conditions  are  not  ful- 
filled, the  contract  has  no  force.  In  many  cases  the 
court  considers  the  failure  of  the  seller  to  perform 
his  part  of  the  agreement  a  matter  for  compensation 
to  the  purchaser.  A  recent  case  in  a  western  court 
in  which  goods  delivered  were  not  up  to  the  sample 
analysis  was  decided  in  favor  of  the  purchaser  and 
the  burden  of  the  failure  rested  upon  the  seller  who 
was  ordered  to  pay  damages. 

Cancellations. — Legally,  a  contract  that  has  been 
properly  executed  under  the  law  of  contracts,  may 
not  be  canceled  except  upon  mutual  consent,  and  the 
purchasing  executive  who  repudiates  his  contract  is 
liable  to  damages.  It  is  the  business  of  the  courts 
to  hold  the  contracting  parties  to  the  terms  of  their 
contracts  rather  than  to  devise  ways  by  which  the 
agreement  may  be  avoided.  An  offer  to  sell  or  pur- 
chase does  not  become  a  contract  until  it  has  been 
accepted.  A  revocation  of  an  offer  must  be  com- 
municated before  the  offer  is  accepted.  After  its 
acceptance  all  parties  are  bound  to  carry  out  their 
parts  of  the  agreement  according  to  the  terms  of 
the  accepted  offer. 

In  actual  practice,  however,  a  purchaser  seldom 


LEGAL  SIDE  OF  CONTRACTS         131 

has  any  difficulty  in  canceling  his  purchase  order. 
As  a  result  of  the  ease  with  which  orders  may  be 
canceled  a  great  many  purchasing  executives  place 
orders  indiscriminately  with  the  intention  of  can- 
celing them  before  shipment  is  made.  This  is  fre- 
quently used  as  a  method  of  disposing  of  a  persist- 
ent salesman.  During  periods  of  delayed  shipments 
and  difficulties  arising  from  conditions  such  as 
obtained  during  and  immediately  after  the  war, 
orders  are  at  times  placed  with  a  number  of  sellers 
for  the  same  materials.  The  intention  of  the  pur- 
chasing executive  who  does  this  is  to  accept  the 
first  shipment  that  is  received  and  to  repudiate  his 
contracts  with  the  other  sellers.  Obviously  such 
practices  are  bad,  and  if  brought  to  court  would  be 
decided  in  favor  of  the  seller  in  most  cases. 

Much  agitation  has  followed  upon  the  extensive 
cancellation  of  contracts  in  after-war  times  and 
definite  steps  to  sharpen  the  contract-keeping  sense 
of  the  business  world  have  been  taken.  The  ex- 
ample of  several  large  firms  in  taking  enormous 
losses  rather  than  break  or  cancel  contracts  on 
technicalities  has  done  much  in  this  direction. 

Damages. — One  of  the  great  difficulties  experi- 
enced by  lawyers  in  the  trial  of  contract  cases  is 
that  of  ascertaining  and  proving  the  damages  re- 
sulting from  breach  of  contract.  Such  cases  must 
be  decided  according  to  the  evidence  presented  in 
each  case  and  harmony  of  decisions  is  impossible. 
The  parties  may  agree,  in  their  contract,  upon  a 
sum  to  which  either  may  be  entitled  as  a  compensa- 


132      THE  SCIENCE  OF  PURCHASING 

tion  for  a  breach  and  the  courts  will  enforce  such 
an  agreement.  This  is  known  in  law  as  liquidated 
damages.  If,  however,  the  sum  so  designated  is 
designed,  not  as  a  compensation  to  the  party  in- 
jured, but  as  a  penalty  to  be  inflicted,  the  courts  will 
not  uphold  it. 

When  the  purchasing  executive  repudiates  his  con- 
tract after  goods  are  finished,  or  nearly  so,  the 
seller  has  several  courses  open  to  him  in  case  he 
desires  to  refuse  to  accept  the  cancellation.  Most 
of  these,  however,  are  too  involved  to  set  down  here, 
as  there  are  many  elements  in  each  case  which  re- 
quire analysis  by  lawyers.  One  course  that  may 
always  be  followed  by  the  seller  upon  the  purchas- 
ing executive's  refusal  to  accept  goods,  is  to  store 
or  retain  the  property  for  the  purchaser  and  sue 
him  for  the  entire  amount  of  the  purchase  price. 
At  times,  he  may  keep  the  property  as  his  own  and 
recover  the  difference  between  the  market  value  at 
the  time  and  place  of  delivery  and  the  contract  price. 

Even  the  most  painstaking  of  purchasing  execu- 
tives will,  at  times,  overlook  some  technical  point 
in  contracts  to  which  his  signature  is  affixed,  or  in 
acceptance  of  which  he  has  returned  a  signed  formal 
sales  slip  furnished  by  the  seller.  But  a  general 
knowledge  of  the  legal  side  of  contracts  cannot  but 
prove  an  aid  to  him  in  discovering  these  points. 
Many  a  purchasing  executive  has  saved  himself  an 
uncomfortable  half  hour  in  the  office  of  an  attorney 
by  his  knowledge  of  the  fundamental  rights  and 
liabilities  of  the  parties  to  a  contract. 


CHAPTER  XI 
ETHICAL  SIDE  OF  PURCHASING 

Function  of  Ethics  in  Business. — Ethics  is  the 
science  of  human  inter-relationship.  As  the  great 
majority  of  people  have  more  business  relationship 
in  modern  life  than  any  other  type  of  relationship, 
it  has  become  vitally  important  that  these  relation- 
ships be  made  thoroughly  ethical.  The  practical 
purpose  of  this  is  the  reduction  of  friction,  the  de- 
velopment of  higher  standards,  the  saving  of  time 
and  energy  and  consequently  greater  business  speed, 
safety  and  productivity.  This  can  be  accomplished 
by  common  reference  to  a  single  form,  or  accepted 
standard,  of  ethical  judgments. 

Ethics  are  usually  confined  to  the  particular  field 
of  human  character  and  conduct  commonly  known  as  ^ 
moral  principles.  An  action  to  be  ethical  must  con- 
form with  the  principles  of  right  in  the  abstract. 
But  the  human  race's  experience  with  warfare  and 
sport  has  introduced  the  element  of  "fair  play." 
It  must  be  fair  as  well  as  honest;  it  must  not  only 
conform  with  the  law  but  must  enter  into  every 
minute  circumstance  connected  with  the  interests 
of  all  parties  directly  or  indirectly  concerned  in  the 
action.  It  must  conform  with  the  "rules  of  the 
game"  as  gentlemen  play  it.  Men,  in  general, 

133 


134      THE  SCIENCE  OF  PURCHASING 

think  of  their  own  and  each  other's  characters  as 
good  or  bad;  of  their  conduct  as  right  or  wrong. 
But  we  now  know  that  much  of  human  conduct  is  in 
a  gray  zone  which  becomes  debatable,  uncertain 
ground,  unless  detailed  ethical  standards  are  worked 
out,  just  as  rules  for  tennis  or  baseball  are  worked 
out.  Only  in  this  way  can  antagonisms,  abuses, 
favoritisms  and  inequalities  be  avoided.  If  there  is 
no  clearly  denned  standard  of  conduct,  men  will 
often  resort  to  equivocation  and  erroneous  action. 

Not  only  unprincipled  men,  but  men  whose  moral 
consciousness  is  well  developed,  but  whose  shrewd- 
ness and  keen  desire  to  "get  the  best  of  the  bargain " 
overrules  their  better  judgment,  fall  prey  io  this 
situation.  As  in  any  clean  athletic  game,  disputes 
among  players  are  deplorable,  and  usually  disappear 
when  codes,  rules  and  standards  are  clearly  set  up, 
so  men  will  not  then  try  to  see  what  they  can  "get 
away  with,"  because  they  value  their  professional 
standing,  which  is  affected  by  infractions  of  the 
trade  code.  In  the  Roosevelt  days  "big  business7' 
had  no  well  defined  codes;  to-day  things  that  were 
freely  done  then  in  business  are  illegal,  and  many 
others  are  simply  held  unethical  according  to  mod- 
ern standards. 

It  is  a  healthy  tendency  when  such  codes  are  de- 
veloped, and  a  "sporting"  attitude  of  f airplay,  as 
well  as  an  appreciation  of  the  equal  rights  of  all 
parties  in  a  transaction,  are  considered.  A  very 
illuminating  and  stimulating  exposition  of  this  new 


ETHICAL  SIDE  OF  PURCHASING     135 

attitude  will  be  found  in  The  Great  Game  of  Busi- 
ness, by  J.  George  Frederick  (Appleton,  1919). 

Usefulness  of  Ethical  Standards  in  Business.—The 
ancient  adage,  "Caveat  emptor"  (Let  the  buyer  be- 
ware), indicated  the  existence  of  a  stultifying  and 
costly  mode  of  business  operation.  Unless  high- 
principled  business  men  associate  themselves  con- 
tinually in  favor  of  clean  trading,  the  cynical  motto, 
"Do  others  before  you  are  done  by  them,"  will  gain 
predominance.  Business  is  not  yet  out  of  the  period 
when  it  has  popular  odium  and  suspicion  attached 
to  it,  and  constant  insistence  upon  high  standards 
is  important.  Those  who  have  one  set  of  principles 
for  their  personal  life  and  another  set  of  principles 
for  daily  conduct  of  business  are  now  distinctly  the 
enemies  of  good  business.  It  is  no  longer  a  question 
of  honesty  as  a  best  broad  policy — it  is  a  question  of 
being  aggressive  and  meticulous  to  see  that  even 
impressions  or  suspicions  or  possibilities  of  ethical 
misunderstandings  be  removed. 

A  practical  part  of  the  machinery  of  ethical  stand- 
ards in  business  is  the  law.  Crude  legislation  has 
harmed  business,  but  is  now  being  cleared  up 
through  judicial  decisions.  As  business  revolves 
largely  around  contractual  relationships  we  have 
contract  laws  which,  after  a  great  many  court  cases 
and  decisions,  have  well  worked  out  the  rights  of 
parties  to  a  transaction.  The  Federal  Trade  Com- 
mission has  worked  out,  as  a  result  of  complaints, 
various  decisions  and  judgments  which  authorita- 
tively indicate  what,  under  special  circumstances,  is 


136      THE  SCIENCE  OF  PURCHASING 

ethical  and  just.  Various  professions  and  trades 
have  worked  out  "codes"  and  general  business  or- 
ganizations have  gone  on  record  with  their  consensus 
of  opinion.  The  example  of  high-grade  houses  has 
also  set  precedents  and  led  the  way;  so  that  the 
usefulness  of  ethical  standards  and  insistence  upon 
them  is  now  thoroughly  proved. 

Purchasing  Ethics  and  Purchasing  Policies.— 
Probably  no  branch  of  business  has  been  so  beset 
with  temptation  and  pressure  on  the  ethical  side  as 
the  purchasing  branch.  A  most  notable  houseclean- 
ing  has  taken  place  in  purchasing  ethics  in  the  past 
several  decades,  and  purchasing  is  now  taking  on  the 
character  of  a  distinct  profession,  with  a  profes- 
sional pride  in  ethical  standards.  A  firm  that  coun- 
tenances questionable  conduct  on  the  part  of  its  pur- 
chasing executive  soon  becomes  known  as  generally 
lacking  in  principle.  A  purchasing  executive  who 
indulges  in  unfair  methods  of  buying,  or  methods 
verging  upon  sharp  practice  in  his  dealings  with  the 
seller,  gives  the  impression  that  his  concern  is  op- 
erating on  dishonest  or  questionable  policies.  The 
purchasing  executive  who  succeeds  where  others  fail 
must  himself  be  honest  and  of  high  principles.  This 
makes  it  easier  to  be  fair  in  his  dealings  with  his 
source  of  supply. 

The  correct  view  of  the  purchasing  executive  is 
to  feel  that  it  is  his  duty  to  procure  for  his  firm 
the  greatest  value  for  the  money  expended,  but  at 
the  same  time  to  feel  a  responsibility  for  the  repu- 
tation of  his  employers.  There  is  a  difference  be- 


ETHICAL  SIDE  OF  PURCHASING     137 

tween  getting  one's  money's  worth  and  getting  the 
best  of  a  bargain.  No  modern  purchasing  executive 
allows  his  desire  to  save  money  for  his  firm  to  lead 
him  among  the  byways  of  underhand  methods.  To 
keep  his  business  transactions  unfailingly  up  to  a 
high  standard,  he  will  require  himself  to  give  at- 
tention to  a  square  deal  for  the  firm  he  buys  from, 
in  addition  to  the  interests  of  his  own  firm.  This 
has  no  purely  philanthropic  aspect;  he  is  not  re- 
quired to  act  as  nurse  to  the  vender.  But  it  does 
mean  that,  upon  the  principle  of  the  law  of  averages, 
a  uniformly  gentlemanly  treatment  of  the  vender 
will  result  in  purchasing  advantages  of  very  mater- 
ial kind. 

Need  for  Laws  to  Enforce  Ethical  Methods.— 
Codes  of  ethics  as  drawn  up  by  various  trade  organi- 
zations, business  associations,  chambers  of  com- 
merce, etc.,  throughout  the  country  have  done  much 
toward  differentiating  between  fair  and  unfair  prac- 
tices. But  codes  of  ethics  influence  only  those 
minded  to  be  ethical.  For  the  others,  laws  must 
be  passed.  It  must  be  made  unlawful  for  a  seller  to 
hide  his  dishonesty  under  cover  of  a  trade  custom 
or  to  excuse  his  unfair  practices  by  pleading  that 
such  and  such  has  always  been  done.  For  this  pur- 
pose the  Federal  Trade  Commission  was  created  in 
1914.  Under  the  commission's  organic  act:  "All 
unfair  practices  are  hereby  declared  unlawful." 

Before  the  creation  of  this  commission  it  was 
practically  business  suicide  for  any  manufacturer  or 
seller  to  conduct  his  business  along  absolutely  ethi- 


138      THE  SCIENCE  OF  PURCHASING 

cal  lines,  because  of  the  diversity  of  trade  "evils" 
known  as  trade  "customs"  which  operated  with 
impunity.  For  example,  it  was  formerly  a  custom 
in  the  sponge  trade  to  "load"  sponges  with  salts, 
glucose,  or  other  heavy  material,  thus  increasing  the 
weight  of  the  shipment  and  decreasing  the  actual 
quantity  of  sponges  delivered  to  the  buyer.  Ob- 
viously, a  marketer  of  sponges  who  did  not  "load" 
his  shipment  must  deliver  more  sponges  to  the 
pound  than  his  less  ethical  competitors  and  at  a 
price  that  would  compete  with  the  price  they  were 
asking.  Undoubtedly  there  were  many  marketers 
of  sponges  who  considered  the  practice  an  imposi- 
tion on  the  buyer,  but  it  was  the  custom  of  the 
trade  to  "load"  sponges  and  all  sellers  were  com- 
pelled to  practice  it.  It  would  have  been  useless 
for  a  few  dealers  in  the  sponge  trade  to  refuse  to 
follow  the  custom.  A  code  of  ethics,  agreed  upon 
by  every  marketer  of  sponges,  would  have  been 
equally  useless,  for  there  would  always  be  some  one 
firm,  or  some  group  of  firms,  who  would  disregard 
the  code.  The  custom  had  to  be  prohibited  by  law, 
and  it  was  the  honest  men  in  the  trade  who  asked 
that  such  a  law  be  passed. 

Similarly,  there  has  been  much  controversy  over 
hundreds  of  moot  points  of  ethics  which  are  now 
crystallizing  into  laws,  such  as  the  Pure  Food  laws 
and  others. 

Past  Practices  against  the  Purchasing  Executive. 
— Before  the  creation  of  the  Federal  Trade  Commis- 
sion, the  purchasing  executive  had  no  redress  un- 


ETHICAL  SIDE  OF  PUECHASING     139 

less  his  difficulties  arose  through  some" unmistakable 
contractual  breach  on  the  part  of  the  selling  firm. 
Prior  to  1914  the  average  purchasing  executive  was 
not  the  scientific  analyst  that  he  is  to-day.    He  could 
be  tricked  by  all  manner  of  subterfuge.    Articles 
were  misbranded,  either  as  regards  the  materials  or 
ingredients   of  which   they   were   composed,   their 
quality,  their  method  or  place  of  manufacture  or 
origin;  or,  by  "inferential"  misbranding,  that  is, 
by  the  use  of  trade-names  or  descriptive  terms  which 
simulated  trade-names  or  descriptive  terms  of  un- 
adulterated or  genuine  goods.    Trade  boycotts  or 
combinations  of  traders  prevented  the  purchasing 
executive  from  obtaining  goods  through  the  channels 
he  chose.    He  was  sold  rebuilt  articles  as  new  pro- 
ducts. He  bought  one  article  at  less  than  cost  and  un- 
consciously paid  the  difference  on  some  other  article 
sold  at  the  same  time.    Market  conditions  were  mis- 
represented to   him  by   salesmen  overanxious   to 
secure  his  order.    His  employees,  or  employees  in 
another  department  of  his  firm,  were  influenced  to 
specify  certain  brands  of  goods  because  of  the  lot- 
tery premiums  or  other  gratuities  offered  to  them, 
etc.    The  list  of  unethical  methods  of  obtaining  busi- 
ness from  the  buying  concern  is  endless. 
Effect  of  Specialized  Buyers  upon  Sales  Methods. 
— To-day,  however,  the  purchasing  executive  has 
more  definitely  mastered  his  profession.    He  knows 
what  he  wants  and  why  he  wants  it.    His  specialized 
knowledge  of  markets,  materials  and  methods  of 
manufacture  protect  him  from  mistakes.    He  is  pro- 


140      THE  SCIENCE  OF  PURCHASING 

vided  with  laboratories  which  test  samples  of  pro- 
posed purchases ;  he  has  the  means  whereby  he  can 
assure  himself  beyond  all  question  that  he  has  re- 
ceived the  desired  article.  He  makes  his  purchases 
on  merit  alone  and  depends  upon  laboratory  and  fac- 
tory reports  to  corroborate  his  judgment.  Sellers 
have  been  quick  to  recognize  the  specialist  in  the 
buying  field  and  to  adapt  their  methods  to  the  new 
demand. 

For  those  sellers  who  are  slow  to  abandon  the 
old  unfair  practices,  the  purchasing  executive  has 
recourse  to  the  law  through  application  to  the  Trade 
Commission  for  the  issuance  of  a  formal  complaint 
against  the  seller  who  conducts  his  business  contrary 
to  the  Federal  Trade  Act  of  1914.  The  creation  of 
this  commission  has  had  a  regenerative  effect  upon 
trade  ethics.  Many  trade  customs  which  are  not 
included  in  the  Trade  Act  against  unfair  practices 
have  been  abandoned  by  the  mutual  consent  of 
groups  of  sellers  called  together  for  the  purpose  of 
eliminating  or  modifying  trade  practices  that  even 
" verge  upon  the  unfair."  Sellers  must,  in  self- 
defense,  refrain  from  trickery  in  obtaining  the  busi- 
ness of  the  purchasing  executive  of  the  present.  It 
is  the  belief  of  professional  purchasing  executives 
that  it  has  been  their  forward  march  in  the  purchas- 
ing profession  that  has  brought  the  consciousness  of 
a  fundamental  moral  principle  in  business  to  the 
fore.  The  seller,  the  purchasing  executive,  and  the 
public  profit  by  the  changes  that  are  apparent  in 
business  methods  of  to-day. 


ETHICAL  SIDE  OF  PURCHASING     141 

Competition  versus  Corruption. — Throughout  the 
business  world  there  has  been  discernible  for  years 
a  desire  to  reform  business  methods.  A  tremendous 
impetus  was  given  it  by  Eoosevelt,  and  the  advertis- 
ing clubs  and  commercial  organizations  with  their 
"vigilance"  work  and  propaganda  was  very  epoch- 
making.  This  wish  for  cleaner  trading  has  been 
built  up,  subconsciously  to  a  large  extent,  in  the 
minds  of  the  new  type  of  business  men  who  had 
a  very  emphatic  sense  of  practical  idealism  in  busi- 
ness. The  "fair  field  and  no  favor"  attitude  was 
beginning  to  have  its  effect  both  in  the  selling  and 
buying  field  even  before  the  year  1914.  But  de- 
velopments during  the  war  crystallized  the  deter- 
mination of  business  men  to  eliminate  all  unfair 
practices  not  only  by  law  but  by  a  liberal  education 
in  ethics  as  well.  It  is  a  paradox  that,  while  laws 
are  necessary  in  order  to  insure  ethical  behavior, 
ethics  are  essential  in  persuading  men  to  act  within 
the  law. 

The  basic  integrity  of  American  business  is  un- 
questionable, but  under  the  terrific  pressure  of  war- 
time haste  and  waste  every  person,  from  the  presi- 
dent of  a  concern  down  to  the  office  boy,  was  imbued 
with  the  necessity  of  keeping  the  factory  running 
by  "hook  or  crook."  In  the  majority  of  cases  it 
was  the  crooked  method  that  got  results.  Contracts 
were  broken ;  prices  were  boosted  beyond  all  reason ; 
articles  for  sale  were  misbranded  and  adulterated; 
profiteering,  bribing  and  grafting  in  all  forms 
sprang  up  and  law  and  ethics  were  forgotten.  In- 


142      THE  SCIENCE  OF  PURCHASING 

stead  of  competition  we  had  corruption,  and  especi- 
ally the  corrupt  practice  of  commercial  bribery. 
This  war-time  orgy  of  misbehavior  ethically  was 
world-wide  in  extent  and  has  been  superseded  by 
a  more  sobered  outlook. 

Agitation  and  Laws  against  Bribery. — With  the 
return  to  normalcy,  conditions  became  favorable  for 
the  promotion  of  an  even  higher  morale  in  business 
than  obtained  before  the  war.  It  is  manifest  that 
commercial  bribery  is  by  far  the  greatest  ethical 
danger  still  confronting  American  business  men  to- 
day. In  fact,  " grafting'*  has  become  an  interna- 
tional question.  The  commerce  of  the  world  is  grow- 
ing so  closely  knit  that  bribery  in  one  country  reacts 
adversely  upon  other  countries.  The  vital  necessity 
for  eliminating  this  evil  is  a  matter  of  world  welfare 
and  touches  all  of  us.  All  of  the  European  coun- 
tries have  passed  laws  against  bribery;  and  it  has 
been  hoped  that  a  new  association  of  nations  and  the 
new  international  chamber  of  commerce  will  take 
steps  to  standardize  trade  morale  the  world  over. 

In  our  own  country  fifteen  or  sixteen  states  have 
carried  antibribery  laws  on  their  statute  books  for 
the  past  ten  years  or  more.  But  these  laws  have 
not  been  energetically  enforced,  and  the  fact  that 
no  such  laws  exist  in  so  many  of  our  states  puts 
our  own  business  men  under  a  severe  handicap. 
The  Federal  Trade  Commission  has  done  much  to 
repress  the  practice  of  offering  secret  gratuities, 
but  the  United  States  Circuit  Court  of  Appeals  has 
declared  that  the  commission  cannot  exercise  its 


ETHICAL  SIDE  OF  PUECHASING     143 

authority  against  commercial  bribery  as  an  unfair 
method  of  competition.  A  law  passed  by  congress 
is  necessary  to  make  commercial  bribery  a  federal 
offense  in  the  United  States,  and,  as  such  a  bill  is 
already  introduced,  and  a  very  active  propaganda 
is  being  waged  by  leading  business  associations  in 
favor  of  it,  it  seems  at  this  writing  as  if  it  will 
become  a  law. 

Moral  and  Material  Aspects  of  Bribery  .—-Undoubt- 
edly the  modern  purchasing  executive  and  the  mod- 
ern salesman  are  on  a  higher  plane  of  business 
ethics  than  ever  before.  Business  conditions,  years 
ago,  were  unspeakable.  In  the  majority  of  cases  to- 
day, social  intercourse  between  buyer  and  seller  is 
not  a  matter  of  "  intensive  cultivation  of  friend- 
ship, "  as  it  was  formerly,  but  the  tactful  exchange 
of  courtesies,  the  getting  acquainted  for  the  pur- 
pose of  talking  business.  The  purchasing  executive 
of  to-day  may  accept  the  luncheon  invitation  of  a 
salesman  without  feeling  thast  the  salesman  "has  an 
ax  to  gri:>d."  He  need  have  no  fear  that  his  integ- 
rity is  duubted,  or  that  an  attempt  is  being  made 
to  influence  his  buying  judgment  by  "  entertain- 
ment. "  He  may  be  reasonably  sure  that  he  will 
not  be  offered  a  lump  sum  of  money,  a  commission, 
a  discount,  a  valuable  gift,  or  other  form  of  com- 
mercial bribery. 

Both  seller  and  buyer  have  come  to  realize  that 
all  merchandise  should  be  sold  on  its  merits  and 
not  mingled  with  any  personal  understandings  or 
considerations.  The  whole  framework  of  trade  is 


144      THE  SCIENCE  OF  PURCHASING 

built  upon  the  definition  of  competition  as  the  striv- 
ing to  gain  a  particular  object  by  honest  means. 
The  entire  theory  and  practice  of  advertising  are 
predicated  on  the  assumption  that  the  purchaser  is 
making  a  free  and  unhampered  choice  on  the  merits 
of  the  competing  products.  Business  men  through- 
out the  country  have  become  convinced  that,  both 
from  a  moral  and  a  material  aspect,  bribery  is  a 
most  costly  and  useless  method  of  competition,  and, 
they  are  uncompromising  in  their  antagonism  to  it 
in  any  form,  however  subtle. 

Commercial  Bribery  Defined. — Commercial  bri- 
bery, as  we  use  the  word,  "  involves  a  transaction 
whereby  a  seller  gives  something  of  value  to  the 
employee  of  a  customer,  or  to  the  employee  of  his 
competitor's  customer  or  prospective  customer 
without  the  knowledge  of  the  employer,  and  with 
the  purpose  or  with  the  effect,  or  for  the  purpose 
and  for  the  effect,  of  causing  that  employee  to  seek 
to  influence  the  buying  judgment  of  his  employer." 
This  is  on  the  authority  of  Wm.  B.  Colver,  U.  S. 
Federal  Trade  Commissioner,  before  the  Purchas- 
ing Agents  of  New  York. 

The  three  tests  to  apply  are  these: 

1.  The  giving  must  be  done  without  the  knowl- 
edge of  the  employer. 

2.  The  thing  given,  or  promised  to  be  given,  must 
be  of  so  great  value  that,  prima  facie,  the  transac- 
tion is  for  the  purpose  of  influencing  the  judgment 
or  obtaining  the  secret  support  of  the  employee  or 
purchasing  agent. 


ETHICAL  SIDE  OF  PURCHASING      145 

3.  When  the  thing  is  of  lesser  value — and  here 
comes  the  element  of  entertainment — whether  or 
not  the  manner  of  its  giving,  or  of  the  promise  to 
give,  is  such  as  either  to  be  intended  to,  or  inffact 
does  result  in  an  undue  influence  upon  the  judgment 
or  conduct  of  the  employees  of  the  purchaser  or  the 
prospective  purchaser.  If  the  entertainment  is  of 
such  a  character  as  to  be  the  "  intensive  cultivation 
of  friendship"  unknown  to  the  employer,  then  the 
practice  is  not  good,  and  modern  business  men  recog- 
nize it  as  commercial  bribery  and  put  a  ban  on  it. 

Christmas  Gifts. — The  custom  of  giving  expensive 
Christmas  gifts  to  buyers  is  fast  dying  out,  but 
there  are  still  many  firms  who  allow  their  salesmen 
expense  accounts  for  presents  to  customers.  Em- 
ployers have  come  to  expect  the  holidays  to  bring 
gifts  to  their  employees  so  that  the  gifts,  to  all 
intents  and  purposes,  is  not  a  form  of  commercial 
bribery.  Under  the  English  law  against  bribery,  it 
is  the  condition  of  secrecy  that  makes  a  gift  a  bribe. 
Nevertheless,  many  gifts  are  made  openly  which  are 
intended  by  the  giver  to  influence  the  future  con- 
duct of  the  recipient,  and  are,  therefore,  essentially 
questionable  ethically.  There  is  such  a  thing  as  an 
effort  at  unconscious  bribery ;  an  effort  to  affect  the 
unconscious  mind. 

If  the  spirit  back  of  the  gift  is  one  of  appreci- 
tion  of  business  during  the  preceding  year,  there  is 
no  ethical  reason  why  the  purchasing  executive 
should  not  accept  the  gift  in  the  spirit  in  which 
it  is  given.  But  salesmen  frequently  take  advantage 


146      THE  SCIENCE  OF  PURCHASING 

of  the  holiday  season  to  send  expensive  Christmas 
gifts  to  their  customers  or  prospective  customers. 
Because  of  the  season,  purchasing  executives  who 
would  not  think  of  accepting  a  bribe,  accept  such 
presents  as  a  matter  of  course,  without  realizing 
that  they  are  obligating  themselves  to  the  sales- 
man. Others,  of  less  high  principles,  make  it  known 
to  the  salesman  that,  unless  such  remembrances  are 
forthcoming,  the  next  time  the  salesman  calls  he 
will  get  no  order. 

Many  purchasing  executives  are  to-day  conveying 
the  information  to  salesmen  that  they  will  not  ac- 
cept anything  of  value  at  any  season  of  the  year, 
thus  forestalling  any  unpleasantness  that  might  re- 
sult from  the  refusal  of  the  gift.  The  difference 
between  gifts  as  tokens  of  appreciation  and  gifts 
as  bribes  is  great;  but  it  is  often  difficult  for  the 
purchasing  executive  to  strike  a  middle  course.  To 
do  so  calls  for  the  exercise  of  his  powers  of  analysis, 
his  foresight,  and  his  innate  common  sense. 

Purchasing  Executive's  Duty  to  His  Profession. 
— Although  we  are  told  repeatedly  that  "one  swal- 
low does  not  make  a  summer, ' '  the  popular  mind  has 
come  to  assume  that  the  purchasing  profession  is 
to  some  extent  a  graft-receiving  class.  This  im- 
pression has  arisen  because  there  have  been  in- 
stances in  which  purchasing  agents  or  buyers  have 
been  known  to  accept  gratuities  from  selling  firms. 
Investigations  show  that  the  men  most  susceptible  to 
taking  bribes  are  the  minor-plant  officials,  depart- 
ment foremen,  engineers,  etc.,  whose  disloyalty  re- 


ETHICAL  SIDE  OF  PURCHASING     147 

acts  upon  the  purchasing  profession.  To  remove 
this  stigma,  it  is  the  duty  of  every  purchasing  ex- 
ecutive to  investigate  thoroughly  the  character  and 
conduct  of  the  men  from  whom  he  received  requisi- 
tions for  purchases. 

Lack  of  proper  supervision  and  control  of  men 
and  material,  accompanied  by  ignorance  and  incom- 
petency  on  the  part  of  responsible  heads  of  a  busi- 
ness, encourage  graft.  Obviously,  the  underpaid 
employee  has  a  greater  incentive  to  solicit  graft 
than  one  who  is  paid  an  adequate  salary.  On  the 
other  hand,  it  appears  unlikely  that  a  confirmed 
bribe  taker  will  voluntarily  forego  an  opportunity  of 
taking  tribute.  He  must  be  made  to  see  that  the  ac- 
cepting of  gratuities  makes  him  serve  two  masters, 
and  that  this  cannot  be  done  with  justice  to  either. 
Manufacturers  must  rely  upon  the  honesty  and 
loyalty  of  'their  employees,  but  it  cannot  be  doubted 
that  weakness  on  the  part  of  employers  encourages 
bribery  and,  in  many  instances,  the  entire  responsi- 
bility of  proper  supervision  of  materials  falls  upon 
the  purchasing  executive.  For  the  honor  of  his 
profession  the  purchasing  agent  must  do  all  in  his 
power  to  remove  the  stigma  of  bribery.  For  the 
purchasing  executives'  own  guidance  the  following 
rules  are  given : 

1.  The  purchasing  executive  shall  act  in  all  pro- 
fessional matters  strictly  in  a  judiciary  man- 
ner with  regard  to  any  purchases  he  may  make, 
and  his  salary  shall  constitute  his  only  re- 


148      THE  SCIENCE  OF  PURCHASING 

numeration  in  connection  with  such  purchases. 

2.  He  shall  not  accept  any  trade  commissions,  dis- 
counts, allowances,  or  any  indirect  profit  in 
connection  with  the  purchases. 

3.  He  shall  not,  while  acting  in  a  professional 
capacity,  be,  at  the  same  time,  without  disclos- 
ing the  fact  to  his  employers,  a  director  or 
shareholder  in  any  company  with  which  he  may 
have  occasion  to  deal.    Neither  shall  he  act 
as  agent,  nor  in  any  other  way  have  any  finan- 
cial interest  in  such  a  business. 

4.  He  shall  not  receive,  directly  or  indirectly,  any 
royalty  or  commission  on  any  patented  or  pro- 
tected article  or  process  used  on  the  article 
purchased,    unless,    and   until,    such    royalty, 
gratuity  or  commission  has  been  authorized  by 
his  employer. 


CHAPTER  XII 

ORGANIZATION  OF  THE  PURCHASING 
DEPARTMENT 

Correct  Conception  of  the  Purchasing  Organiza- 
tion.— The  purchasing  organization  must  be  up-to- 
date.  It  must  be  built  upon  plans  that  will  allow  for 
expansion  or  curtailment  without  reorganization  and 
yet  be  complete  enough  to  handle  the  maximum  of 
present-day  business  with  ease  and  perfection.  The 
greater  number  of  business  organizations  have 
grown  unevenly  from  small  beginnings.  During  the 
war,  especially,  small  concerns,  having  organizations 
— sales,  accounting,  factory,  purchasing,  etc. — that 
were  sufficient  for  the  business  being  transacted  at 
the  beginning  of  the  war,  grew  with  such  rapidity 
and  to  such  magnitude  that  their  various  depart- 
ment organizations  and  systems  were  swamped. 
Many  a  purchasing  executive,  who  had  followed  the 
plan  of  remembering  the  names  of  the  firms  from 
which  he  bought  and  the  prices  paid  for  materials, 
and  trusting  to  his  retentive  mind  for  the  greater 
part  of  his  data,  suddenly  found  himself  lost  in  the 
overwhelming  demands  which  fell  upon  him  because 
of  war  orders. 

As  with  the  sales  organization,  which  should  be 
built  to  fit  the  full  possibilities  of  sales  rather  than 

149 


150      THE  SCIENCE  OF  PURCHASING 

the  hit-or-miss  accident  of  sales,  so  with  the  pur- 
chasing organization.  It  should  be  designed  to  help 
build  up  the  business  and  to  anticipate  the  future 
growth  of  the  industry.  Even  if  it  is  necessary  to 
reorganize  the  department  and  to  discard  the  old 
system  entirely,  it  is  essential  to  provide  the  or- 
ganization with  proper  tools  that  are  capable  of 
expansion.  The  purchasing  organization  is  like  the 
factory,  in  that  it  must  have  modern  equipment  with 
which  capable  men  may  work. 

Purpose  of  System. — System  is  the  set  of  tools 
with  which  the  office  employees  must  work.  These 
tools  must  be  elastic,  and  adaptable  to  condensation 
or  expansion.  System  is  largely  a  matter  of  records 
entered  in  a  certain  order.  The  value  of  records 
is  for  comparison.  Entries  that  are  not  useful  for 
this  purpose  are,  as  a  rule,  superfluous.  The  pres- 
ent-day tendency  is  to  make  records  too  complete, 
thus  overloading  the  office  with  a  system,  installed, 
in  many  instances,  because  another  firm  installed 
it,  or  for  pure  love  of  system  and  lots  of  it. 

There  are,  to-day,  many  efficiency  experts,  speci- 
alists in  systematizing,  industrial  engineers,  organi- 
zation specialists,  etc.,  who  are  capable  of  equipping 
offices  with  a  correct  system  and  of  directing  the  or- 
ganization of  any  or  all  departments.  Unfortu- 
nately, there  are  also  men  who  call  themselves  ex- 
perts who  are  incapable  of  carrying  out  this  work 
successfully.  These  are  largely  responsible  for  the 
fact  that  many  small  firms  are  at  present  tangled 
up  in  a  mass  of  red  tape  from  which  it  will  take  a 


PURCHASING  DEPARTMENT         151 

bona  fide  expert  to  extricate  them.  There  are,  too, 
a  great  many  large  firms  that  are  floundering  in  a 
mire  of  antiquated  forms  and  systems  long  since 
outgrown,  that  should  have,  and  probably  would 
have,  been  discarded  at  the  beginning  of  business 
growth,  were  it  not  for  the  fear  of  falling  into 
the  hands  of  an  unreliable  type  of  experts. 

To  repeat :  the  purpose  of  system  is  for  facilitat- 
ing operation  and  recording  necessary  data  in  the 
simplest  possible  manner.  All  unnecessary  data 
should  be  eliminated.  In  weighing  the  points  of 
the  old  system,  or  in  considering  the  new  one,  the 
following  questions  should  be  asked: 

1.  What  result  is  desired? 

2.  What  information  is  necessary  to  get  this  re- 
sult? 

3.  What  is  the  simplest  form  in  which  to  record 
this  data? 

4.  Is  the  result  worth  the  cost  in  time  and  money 
expended? 

Satisfactory  answers  to  these  questions  are  the 
tests  of  the  value  of  any  system. 

Reason  for  Different  Kinds  of  Purchasing  Organi- 
zations.—The  aim  of  the  purchasing  executive  and 
his  organization  under  anjrfcondition  is  to  buy  as 
cheaply  as  possible  the  quality  of  materials  needed 
by  the  firm.  It  is  not  possible  to  set  down  any  hard- 
and-fast  rules  to  be  followed  in  accomplishing  this 
aim,  or  in  organizing  the  department  that  is  to 
assist  in  its  accomplishment.  The  kind  of  organi- 


152      THE  SCIENCE  OF  PURCHASING 

zation  depends  largely  upon  the  volume  of  the  busi- 
ness and  the  amount  of  the  yearly  purchases.  It 
stands  to  reason  that  the  concern  spending  a  few 
thousand  dollars  a  year  does  not  need  the  elaborate 
system  or  the  extensive  organization  required  by 
the  corporation  whose  expenditures  amount  to  mil- 
lions. 

The  character  of  the  purchasing  department  is 
also  contingent  upon  the  nature  of  the  business. 
For  example,  the  concern  manufacturing  castings 
whose  chief  requirements  are  pig  iron  and  sand 
will  not  need  a  large  purchasing  organization,  or 
even,  unless  the  business  is  very  large,  a  special  pur- 
chasing agent.  The  buying  of  supplies  for  the 
foundry  may  be  attended  to  by  some  member  of  the 
firm  with  the  aid  of  a  stenographer  or  a  bookkeeper. 
The  need  of  a  large  corporation  maintaining  ware- 
houses and  using  the  same  variety  of  articles  year 
after  year  may  be  anticipated  by  the  purchasing  ex- 
ecutive and  purchased  in  quantity  on  a  favorable 
market.  On  the  other  hand,  a  contracting  company 
that  buys  supplies  only  for  the  filling  of  the  con- 
tracts on  hand  requires  a  large  organization  for 
the  purpose  of  following  up  orders  and  seeing  that 
materials  are  delivered  at  the  time  and  place  speci- 
fied. 

It  may  be  seen,  therefore,  that  two  important 
factors  enter  into  the  organization  of  the  purchas- 
ing department  and  the  selection  of  the  correct 
system  of  buying  materials  and  supplies — the  size  of 
the  concern  and  the  nature  of  the  business. 


PURCHASING  DEPARTMENT          153 

Different  Methods  of  Buying  That  Require  Dif- 
ferent Types  of  Organizations. — Broadly  speaking, 
there  are  as  many  different  methods  of  buying  as 
there  are  different  types  of  businesses.  The  nature 
of  the  business,  seasonal  requirements,  etc.,  control 
the  size  of  the  purchases,  while  the  size  of  the  pur- 
chases governs  to  a  large  extent,  the  method  of 
purchasing. 

It  is  not  feasible  to  prescribe  any  one  method  of 
buying,  as  there  are  eight  widely  differing  methods 
calling  for  systems  and  organizations  of  widely 
differing  magnitude. 

1.  Contract  buying,   or   buying  direct   in   large 
quantities  from  a  small  group  of  large  pro- 
ducers. 

2.  Buying  direct  in  smaller  quantities   from  a 
larger  number  of  producers  whose  offices  or 
branch  offices  are  close  to  the  factory  using  the 
materials. 

3.  Buying  in  such  small  quantities  as  to  necessi- 
tate dealing  with  jobbers  only. 

4.  Buying  through  brokers  who  represent  dealers 
or  jobbers. 

5.  Buying  through  salesmen  only. 

6.  Buying  by  mail  through  samples  and  analysis. 

7.  Buying  on  the  open  market  (shopping). 

8.  Buying  through  bids  submitted. 

It  is  possible  also  for  the  purchasing  executive 
to  use  more  than  one  of  the  above  methods,  depend- 
ing entirely  upon  <the  extent  of  the  manufacturing 


154      THE  SCIENCE  OF  PUBCHASING 

activities  of  the  business  and  the  quantities  of  the 
article  needed.  For  example,  a  candy  manufacturer 
may  contract  for  sugar,  buy  condensed  milk  through 
a  broker,  secure  bids  on  boxes,  and  purchase  flavor- 
ing extracts  either  from  a  jobber  or  by  mail  through 
samples  and  analysis. 

Analysis  of  the  Purchasing  Organization.— The 
purchasing  executive  upon  whom  falls  the  duty  of 
organizing  his  department  should  consider  carefully 
the  following  important  points  and  make  sure  that 
it  is: 

1.  Capable  of  handling  the  volume  of  business 
that  passes  through  the  department  without 
over  exertion  and  without  waste  of  time  or 
energy. 

2.  Sufficiently  compact  to  keep  every  worker  at 
high  tension  during  office  hours,  yet  adequately 
elastic  to   allow  for   an  unexpected   rush   of 
business. 

3.  Provided  with  competent  management  and  com- 
plete information  as  to  aims  and  policies. 

4.  Operating  with  a  system  that  does  not  entail 
delay  through  an  excess  of  red  tape. 

5.  Supplied  with  all  data  necessary  for  the  keep- 
ing of  complete  records,  etc. 

6.  Not  hampered  by  records  so  complicated  as  to 
require  time  and  labor  exceeding  the  import- 
ance of  the  data. 

The  purchasing  executive  should  analyze  his 
organization  in  detail  and  should  also  see  to  it  that 
the  following  particulars  are  made  clear  to  each 


PURCHASING  DEPARTMENT         155 

worker  from  the  executive  down  to  the  least  im- 
portant member  of  the  organizaton: 

1.  The  authority,  responsibilities  and  duties  of 
each  worker  should  be  clearly  stated. 

2.  There  should  be  no  possibility  of  doubt  as  to 
who  is  held  responsible  for  each  specific  detail. 

3.  That  each  worker  knows  to  whom  he  or  she  is 
to  report. 

4.  That  each  worker  knows,  in  a  general  way,  the 
duties  of  the  other  workers  in  the  organization. 

5.  That  there  is  no  overlapping  of  duties  and 
authority. 

6.  That  the  work  of  one  group  is  not  duplicated 
by  any  other  group. 

Value  of  a  Definite  Principle  behind  an  Organiza- 
tion.— The  executive  or  his  chief  assistant  should 
watch  closely  the  inner  workings  of  his  organization, 
ascertain  the  reasons  for  dissension  and  misunder- 
standing, hold  frequent  conferences  with  those  em- 
ployees who  seem  to  require  advice,  take  care  that 
accidents  or  mistakes  are  rectified  by  those  workers 
upon  whom  the  responsibility  rests,  and  endeavor 
in  every  way  possible  to  keep  the  wheels  of  the 
organization  running  smoothly.  Workers  should  be 
encouraged  to  take  their  difficulties  to  the  proper 
authority  for  the  purpose  of  having  them  cleared 
up,  and  should  be  made  to  feel  that  these  difficulties 
are  worthy  of  discussion.  The  opportunity  to 
"talk  over"  certain  puzzling  points  will,  in  itself, 
serve  to  put  the  worker  on  his  or  her  metal  and  in 


156      THE  SCIENCE  OF  PURCHASING 

the  majority  of  cases  the  knowledge  that  it  is  pos- 
sible to  gain  an  audience  with  the  man  in  authority 
over  that  particular  department  is  all  that  is  neces- 
sary to  make  the  worker  decide  the  question  for 
himself. 

The  value  of  a  definite  principle  behind  an  organ- 
ization is  the  fixation  of  responsibility.  Each 
member  should  be  made  to  feel  that  he  or  she  is  an 
important  cog  in  the  machinery  of  the  department; 
that  the  firm  appreciates  his  or  her  work  when  it  is 
well  done,  but  thait  another  worker  can  be  found  to 
do  that  work  in  case  the  present  employee  becomes 
careless  or  lax;  and  that  the  firm  is  absolutely  fair 
and  gives  credit  where  credit  is  due  on  the  basis  of 
merit  alone. 

Value  of  Charts  for  the  Fixing  of  Responsibilities. 
—One  of  the  simplest  and,  at  the  same  time,  one 
of  the  most  efficacious  methods  of  fixing  responsi- 
bilities is  that  of  organization  charting.  This 
method  may  be  said  to  be  essential  in  the  large 
organizations  which  have  outgrown  their  original 
systems,  while  it  is  advisable  even  when  the  firm  is 
small.  The  chart  brings  before  the  eyes  of  each 
worker  a  picture  of  his  place  in  the  organization  and 
makes  it  possible  for  him  to  visualize  his  duties  in 
relation  to  the  duties  of  others. 

It  is  to  be  hoped  that  the  advance  of  purchasing 
as  a  science  will  bring  forward  the  purchasing  or- 
ganization specialist.  Until  the  advent  of  such  a 
technician,  however,  it  is  advisable  to  secure  the 
services  of  an  efficient  organization  counselor  of 


PURCHASING  DEPARTMENT          157 

known  dependability.  A  chart-maker  can  draw  up 
a  chart  of  the  organization  as  it  stands,  but,  having 
decided  to  call  in  an  outsider  to  assist  in  making 
possible  a  visualization  of  the  duties  and  responsi- 
bilities of  each  worker,  it  is  well  to  go  a  little  farther 
and  find  out  wherein  the  present  system  and  organ- 
ization may  be  improved. 

The  technician  in  general  organization  is  fitted 
to  take  a  survey  of  the  purchasing  department,  or 
of  any  other  department  of  business  management, 
and  to  advise  whether  or  not  the  present  form  is 
best  suited  to  the  situation.  He  will  analyze  the  de- 
partment, draw  up  a  rough  chart  showing  the  organ- 
ization as  it  stands,  with  crisscrossing  of  lines  of 
authority  and  duties,  pointing  out  the  lost  motion 
that  results.  He  will  then  draw  up  a  correct  chart 
of  the  organization  as  it  should  be,  with  the  duties 
of  each  worker  clearly  defined  and  the  lines  con- 
necting each  function  with  the  one  to  which  it  rightly 
belongs. 

Charting  the  Purchasing  Organization.— For  the 
benefit  of  the  purchasing  executive  himself,  it  is  well 
worth  while  to  call  in  the  organization  specialist  in 
order  to  ascertain  the  efficiency  of  his  office  system 
in  comparison  with  simpler  or  more  modern  systems. 
The  chart  given  in  this  chapter  is  that  of  the  logical 
division  of  necessary  data,  grouped  in  the  order  of 
their  importance,  etc.  No  attempt  has  been  made 
to  show  the  combination  of  divisions  in  the  case  of 
limited  office  force,  or  the  subdivisions  when  the 
volume  of  business  necessitates  many  clerks.  Only 


158      THE  SCIENCE  OF  PURCHASING 

the  data  groups  are  shown  divided  according  to  im- 
portance, and  placed  under  the  proper  responsible 
head.  The  purchasing  executive  reports  only  to  the 
managing  directors.  The  assistant  and  the  chief 
clerk  report  direct  to  the  purchasing  executive.  The 
bulk  and  type  of  the  business  must  necessarily  con- 
trol the  divisions  and  subdivisions  of  these 
data-groups  as  well  as  the  subheads  of  these  divi- 
sions. 

It  may  be  seen  in  the  chart  that  the  bulk  of  the 
details  pass  through  the  hands  of  the  assistant  and 
chief  clerk  before  reaching  the  purchasing  executive 
himself.  In  the  opinion  of  the  writer,  corroborated 
by  purchasing  executives  all  over  the  country,  the 
laboratories  belong  in  the  manufacturing  depart- 
ment and  reports  on  samples  tested  are  recorded  by 
a  clerk  in  the  purchasing  department.  The  stock 
records  should  be  made  in  duplicate,  one  copy  of 
which  is  filed  with  the  purchaser,  the  other  kept  in 
the  stores  department.  The  traffic  division  is 
essentially  a  part  of  the  sales  department  and  serves 
the  purchasing  department  only  in  an  advisory 
capacity  and  for  the  purpose  of  tracing  delayed 
shipments,  adjusting  claims,  etc. 

Matters  for  the  Personal  Attention  of  the  Purchas- 
ing Executive. — The  demands  upon  the  time  and 
energy  of  the  purchasing  executive  are  manifold  and 
diversified.  Briefly,  the  duties  contingent  upon  the 
position  are : 

1.  To  formulate  purchasing  policies  that  agree 
with  the  policies  adopted  by  the  firm  and  to  see 


PURCHASING  DEPARTMENT         159 

to  it  that  these  policies  are  understood  and 
adhered  to. 

2.  To  represent  his  department  in  all  consulta- 
tions between  executives ;  to  report  to  directors, 
owners,  etc.. 

3.  To  see  as  many  salesmen  as  is  possible  and  to 
treat  all  callers  with  invariable  courtesy. 

4.  To  look  after  all  large  orders  and  important 
contracts  from  their  conception  to  their  comple- 
tion. 

5.  To  direct  the  placing  of  all  orders,  large  or 
small. 

6.  To  oversee,  in  a  general  way,  all  details  per- 
taining to  the  purchasing  department. 

7.  To  oversee  all  details  pertaining  to  the  re- 
lations of  his  department  to  other  departments. 

8.  To  keep  in  close  touch  with  all  activities  of  all 
departments  of  his  business  in  their  relation  to 
purchasing  and  in  their  relation  to  each  other. 

9.  To  keep  his  fingers  upon  the  pulse  of  his  organ- 
ization through  direct  contact,  reports  and  con- 
ferences with  his  assistants. 

10.  To  study  requisitions  for  supplies,  with  close 
attention  as  to  quality,  quantity  and  intended 
use.  Also  with  attention  to  duplicate,  or  un- 
necessary, orders. 

Perhaps  the  most  important  function  of  the  pur- 
chasing executive  is  the  selection  of  assistants  and 
members  of  his  organization.  The  success  or  failure 
of  the  purchasing  department  depends  primarily 
upon  the  ability  of  the  executive  to  analyze  men,  to 


160      THE  SCIENCE  OF  PURCHASING 

estimate  their  capacity  for  work  and  to  choose  sub- 
heads for  each  division  of  his  department  with  an 
eye  to  their  ability  to  manage  officeworkers.  It  is 
generally  conceded  that  the  salesmanager  must 
know  mental  state  and  the  factory  manager  must 
know  men  and  machinery.  But  the  need  of  the  pur- 
chasing executive  to  know  all  three  plus  markets 
and  materials  is  usually  overlooked.  The  most  im- 
portant of  these  five  factors  is  a  knowledge  of  men. 
Very  often  it  is  the  assistant  who  selects  the  lesser 
workers.  In  this  event  the  importance  of  a  proper 
selection  of  the  assistant  purchaser  cannot  be  over- 
emphasized. 

The  Duties  of  the  Assistant— It  is  a  difficult  task 
to  assemble  facts,  make  decisions,  etc.,  without  the  in- 
creased factors  entering  into  the  bigger  and  broader 
view  of  purchasing  as  it  is  to-day.  Not  only  is  a 
knowledge  of  markets,  materials  and  men  essential, 
but  a  knowledge  of  organization  as  well.  The  power 
of  leadership  is  quite  as  necessary  to  purchase 
management  as  it  is  to  sales  or  factory  man- 
agement. The  purchasing  executive  who  lacks 
this  qualification  can  do  no  better  than  to 
provide  himself  with  an  assistant  who  possesses 
it. 

It  is  the  duty  of  the  assistant  to  relieve  the  execu- 
tive of  all  possible  details ;  to  stand  between  him  and 
the  petty  annoyances  of  the  daily  routine.  In  many 
large  corporations  the  assistant  purchaser  has  com- 
plete charge  of  the  purchasing  of  certain  groups 
of  materials,  such  as  standardized  fittings,  lubricat- 


PURCHASING  DEPARTMENT          161 

ing  oils,  supplies  for  upkeep,  office  equipment,  etc. 
It  is  usual  for  the  assistant  to : 

1.  Supervise  all  clerical  work  and  workers. 

2.  Check   for   accuracy,   neatness,   completeness, 
etc.,  all  entries  on  index  cards,  all  filing  of 
reports,  bids,  etc. 

3.  Examine  all  correspondence  coming  to  the  de- 
partment and  attend  to  all  but  the  more  im- 
portant matters. 

4.  Handle,   or  assign   some   one  to  handle,   all 
routine  matters. 

5.  Sign  the  purchasing  executive's  name  to  orders, 
letters,  etc.,  when  so  authorized. 

6.  Take  complete  charge  of  the  department  in  the 
absence  of  the  purchasing  executive. 

7.  See  to  it  that  necessary  data  pass  promptly 
from  his  department  to  other  departments  and 
vice  versa. 

Duties  of  the  Chief  Clerk.— Only  the  assistant  and 
the  chief  clerk  report  directly  to  the  purchasing 
executive.  The  work  of  the  two  is  closely  inter- 
woven and  requires  constant  cooperation.  The 
chief  clerk  should  be  more  of  a  detail  man.  His 
duties  are  more  exacting,  in  that  they  deal  with 
routine,  such  as  checking  of  requisitions  with 
written  orders,  checking  of  orders  with  invoices,  and 
the  correct  filing  of  all  data  pertaining  to  orders 
that  have  been  issued. 

As  a  rule  the  chief  clerk  has  charge  of  the  clerks 
in  the  department.  This  is  advisable  in  most  in- 


162      THE  SCIENCE  OF  PUKCHASING 

stances,  as  a  detail  man  is  better  fitted  to  catch 
errors  of  all  sorts  than  is  the  man  of  broader  vision 
and  greater  executive  ability. 

The  purchasing  executive  who  chooses  his  as- 
sistant and  chief  clerk  with  careful  analysis  of  their 
fundamental  characteristics,  assigning  to  each  the 
responsibilities  he  is  best  fitted  to  shoulder  ef- 
ficiently, will  find  the  routine  of  his  office  in  perfect 
condition  at  all  times. 


CHAPTER  XHI 
STORES 

Vital  Necessity  of  Properly  Controlling  Materials 
and  Supplies. — The  materials  and  supplies  neces- 
sary to  the  operation  of  any  business,  represent 
cash — are  cash — only  in  a  less  liquid  form.  These 
materials  and  supplies  should  therefore  receive  the 
same  careful  handling  as  the  dollar  in  the  office.  The 
stores  department,  whether  or  not  so  named,  may 
be  compared  to  a  bank  in  which  the  firm's  finances 
are  deposited,  and  upon  which  checks  are  drawn. 

It  is  the  duty  of  the  credit  department  to  collect 
accounts  and  to  deposit  those  collections  in  a  bank. 
No  receiving  teller  would  accept  a  deposit,  large 
or  small,  without  checking  the  amount  of  the  de- 
posit with  the  notations  on  the  accompanying  de- 
posit slip  and  making  proper  entries  in  the  bank's 
books.  No  paying  teller  would  deliver  currency 
without  a  correctly  written  check,  properly  signed 
and  indorsed,  making  the  necessary  deductions  from 
the  depositor's  account.  If  records  were  not  cor- 
rectly kept  in  the  bank,  the  man  who  made  the  de- 
posits would  very  likely  be  called  upon  to  account 
for  the  muddled  condition  of  the  firm's  finances 
when  the  books  came  to  be  balanced.  The  purchas- 
ing executive  is  in  a  similar  position  to  that  of  the 

163 


164      THE  SCIENCE  OF  PURCHASING 

head  of  the  credit  department.  It  is  his  duty  to 
secure  materials  and  supplies  and  to  see  that  they 
are  delivered  to  the  storeroom.  The  storekeeper  or 
stock  clerk  stands  in  the  position  of  receiving  tel- 
ler to  the  purchaser  and  of  paying  teller  to  the 
men  who  draw  on  the  materials  and  supplies.  No 
goods  should  be  allowed  to  come  into  the  storeroom 
without  proper  inspection,  checking  with  order  and 
entering  on  the  books  or  index  cards.  No  goods 
should  be  allowed  to  go  out  of  the  storeroom  with- 
out a  correctly  written  and  signed  requisition,  fol- 
lowed by  deductions  from  the  amount  on  hand. 
Badly  kept  records  in  the  stores  department  fre- 
quently reflect  upon  the  purchasing  executive  to  his 
disadvantage,  and  his  department  is  called  upon 
to  account  for  the  muddled  condition  of  the  firm's 
stores.  Materials  and  supplies  are  capital  of  real 
value.  They  should  be  safeguarded  with  the  same 
care  as  dollars. 

Defining  the  Stores  Department. — Broadly  speak- 
ing, the  department  of  business  which  has  the  cus- 
tody of  its  stock  in  trade,  materials,  supplies  and 
other  physical  properties,  except  real  estate,  is  tech- 
nically known  as  the  stores  department.  All  goods 
bought  for  resale,  all  primary  materials,  all  sup- 
plies, appliances,  repair  parts,  etc.,  required  in  the 
operation  of  the  business  must  be  purchased,  cared 
for,  systematically  placed,  guarded  and  delivered. 

The  function  of  the  stores  department,  therefore, 
is  to  receive,  check,  store  and  issue  all  materials  and 
supplies  entering  the  establishment.  A  systematic, 


STORES  165 

accurate  and  comprehensive  record  must  be  kept 
of  all  stock  in  the  storeroom  for  the  following  rea- 
sons: 

1.  To  make  sure  that  all  materials  are  used  for 
the  proper  purposes. 

2.  To  prevent  production  delays  through  the  lack 
of  needed  materials. 

3.  To  prevent  over-buying  and  misuse  of  capital. 

4.  To  assure  all  materials  being  accounted  for  as 
part  of  the  finished  cost. 

Selecting  the  Best  Method  of  Managing  Materials. 
— The  quantity  and  nature  of  the  stores  depends 
largely  upon  the  type  and  character  of  the  business. 
Many  concerns  do  not  have  a  department  so  named 
within  their  organizations.  In  the  event  that  a  num- 
ber of  factories,  located  at  different  points,  require 
the  same  material  and  supplies,  it  is  often  consid- 
ered more  economical  to  buy  in  large  quantities, 
specifying  the  different  plants  as  receiving  points, 
than  it  is  to  maintain  a  centralized  warehouse.  Ma- 
terials of  heavy  or  bulky  character  are  more  eco- 
nomically managed  in  this  way,  thus  saving  double 
hauling,  unnecessary  handling,  etc.  Some  concerns 
work  on  a  half-and-half  basis,  ordering  primary 
materials,  heavy  machinery,  etc.,  shipped  direct  to 
the  point  at  which  they  are  needed,  and  keeping  all 
other  supplies  in  some  centrally  located  storeroom. 
Still  others  require  all  materials  and  supplies,  re- 
gardless of  their  nature,  to  go  through  the  hands  of 
the  storekeeper.  These  firms  consider  the  uniform- 


166      THE  SCIENCE  OF  PURCHASING 

ity  of  their  records  to  be  of  more  importance  than 
the  possible  saving  accomplished  by  using  different 
methods  of  handling  different  materials. 

Certainly  the  nature  of  the  materials,  the  loca- 
tion of  the  factories,  and  the  type  and  character  of 
the  business  must  all  be  considered  before  a  decision 
as  to  the  best  method  of  handling  materials  may  be 
reached.  Competent  counsel  on  the  general  mat- 
ter of  system  and  management  should  be  used  to 
work  out  an  economical  plan. 

Supervision  of  Stores. — There  is  a  diversity  of 
opinion  as  to  the  placing  of  supervision  over  the 
stores.  This  difference  is  more  or  less  a  matter 
of  the  policy  of  the  management  and  the  manner  in 
which  the  business  is  conducted.  The  strength  of 
the  different  departments,  the  nature  of  the  mater- 
ials and  supplies,  together  with  the  geographical 
location  of  the  factory  or  factories,  must  be  con- 
sidered before  a  decision  may  be  arrived  at  in  the 
allotting  of  the  responsibility  for  the  proper  man- 
agement of  essential  commodities. 

Many  concerns  are  of  the  opinion  that  stores 
are  of  sufficient  importance  to  warrant  consideration 
as  an  independent  unit  under  the  charge  of  a 
capable  and  intelligent  storekeeper.  Others  believe 
that  the  stock  reports  should  be  kept  by  the  manu- 
facturing department.  If  that  department  is  not 
strong  enough  to  manage  the  stores  properly,  it 
should  be  strengthened  rather  than  relieved  of  the 
responsibility.  But  the  greatest  number  of  corpora- 
tions, taken  by  and  large,  place  the  supervision  of 


STORES  167 

etores  in  the  hands  of  the  purchasing  executive.  In 
most  instances  this  appears  to  be  the  logical  allot- 
ment of  the  responsibility.  For  upon  the  purchas- 
ing department  falls  the  blame  of  all  failures  to 
provide  proper  materials  and  supplies.  As  a  mat- 
ter of  fact,  the  storekeeper  is  coresponsible  with 
the  purchasing  executive  in  the  maintenance  of 
stock.  Unless  the  stores  department  is  an  inde- 
pendent unit,  working  in  cooperation  with  the  pur- 
chasing department,  it  stands  to  reason  that  the 
storekeeper  should  report  to  the  purchasing  execu- 
tive. 

Result  of  Faulty  Store  System, — Upon  the  main- 
tenance of  stock  depends  the  continuity  of  plant 
operation.  Wherever  the  supervision  of  the  stores 
department  is  placed,  care  must  be  taken  to  provide 
the  storekeeper  with  proper  means  of  checking  the 
quantity  of  supplies.  Too  often  a  firm,  operating 
with  the  most  modern  and  complete  office  system  ob- 
tainable, neglects  entirely  the  systematizing  of  store- 
keeping. 

A  faulty  stores  system  may  have  the  following  far- 
reaching  effects  upon  the  business : 

1.  Long  delays  in  manufacturing  through  short- 
age of  materials  and  supplies. 

2.  Unnecessary  expense  due  to  rush  orders  and 
purchases  made  under  unfavorable  conditions. 

3.  Difficulties  arising  from  the  necessity  of  ac- 
cepting faulty  or  makeshift  materials. 

4.  Tying  up  of  capital  by  holding  excessive  quan- 
tities of  stores. 


168      THE  SCIENCE  OF  PURCHASING 

5.  Waste  of  materials  through  loss  and  bad  hand- 
ling. 

6.  Interruption  of  the  continuity  of  operation  with 
its  attendant  money-losing  effects. 

Personal  Qualifications  of  the  Storekeeper.— The 

man  in  charge  of  the  firm's  stock  in  trade  is  not 
only  an  accumulator  and  a  distributor,  but  a  finan- 
cier as  well.  The  stock  he  guards  is  his  firm's  cash. 
He  should,  therefore,  be  a  man  exceptionally  well 
qualified  for  his  duties  of  classifying,  storing  and 
issuing  the  materials  under  his  care.  His  honesty 
and  integrity  should  be  so  strong  a  point  in  his  char- 
acter that  the  men  under  his  control  may  them- 
selves profit  by  his  example.  He  should  possess 
the  ability  to  manage  men  and  materials  with  equal 
facility  and  should  retain  such  a  firm  hold  upon 
his  department  that  the  slightest  infraction  of  the 
rules  would  mean  the  equivalent  of  the  final  pay 
check. 

The  storekeeper  should  be  a  diplomat.  His  per- 
sonality should  be  such  that  he  can  deal  with  all 
classes  of  men  from  the  highest  official  down  to 
the  laborer  handling  scrap.  He  must  of  necessity 
come  in  contact  with  a  great  many  workers  not 
directly  responsible  to  him  for  their  conduct.  Men 
lacking  in  loyalty  to  the  firm,  perhaps;  men  who 
will  deliberately  or  unconsciously  waste  materials 
and  supplies;  men  who  will  appropriate  their  em- 
ployer's property  for  their  own  use,  considering  such 
appropriations  as  their  right ;  men  who  do  not  real- 
ize that  misuse  of  materials  is  the  same  as  misuse 


STORES  169 

of  actual  money — all  will  no  doubt  endeavor  to  use 
stores  contrary  to  rules.  In  order  properly  to  guard 
the  stores,  the  storekeeper  must  be  fearless,  exact- 
ing, yet  tactful.  In  dealing  with  men  of  equal  or 
superior  rank,  he  must  be  able  to  secure  coopera- 
tion and  get  results  through  request  rather  than  by 
argument  or  demand.  He  must  comprehend  his 
status  and  his  duty  as  thoroughly  as  a  sentinel, 
which,  in  fact,  he  is. 

It  is  not  essential  that  the  storekeeper  be  a  factory 
man,  but  the  more  he  knows  about  the  processes  of 
manufacture  going  on  in  the  factory,  the  better  can 
he  fill  Requisitions  and  watch  for  waste  and  unneces- 
sary using  of  materials.  It  is  essential  that  he  be 
familiar  with  the  materials  in  the  storeroom,  ap- 
preciative of  their  value  and  cognizant  of  their 
uses. 

Duties  of  the  Storekeeper. — Service  has  come  to 
be  the  first  requirement  of  every  department  in 
every  type  of  business.  Losses  on  account  of  in- 
efficient service  in  the  stores  department  can  only  be 
estimated,  but  the  half  has  never  been  told. 
"Whether  these  losses  are  caused  by  the  system  of 
stores  management  or  by  the  type  of  man  in  charge 
of  the  stock,  the  effect  upon  the  business  as  a  whole 
is  the  same.  The  stores  department  exists  in  a  cer- 
tain specific  relation  to  the  activities  of  the  busi- 
ness and  it  is  the  duty  of  the  storekeeper  to  see 
that  this  relation  is  maintained. 

The  storekeeper,  with  the  aid  of  his  assistants 
must: 


170      THE  SCIENCE  OF  PURCHASING 

1.  Furnish  material  and  supplies  when  and  where 
they  are  wanted. 

2.  Inspect  and  check  goods  received  and  report 
promptly  all  receipts  with  suitable  description 
of  condition,  etc. 

3.  Eecord  all  goods  received  and  disbursed  in 
such  a  way  that  the  amount  on  hand  may  be 
estimated  at  a  glance  (records  kept  in  this  way 
serve  as  a  perpetual  inventory). 

4.  Maintain  eternal  vigilance  over  stock  and  re- 
fuse to  issue  any  save  on  proper  requisition 
signed  by  the  proper  person. 

5.  Establish  a  maximum  and  minimum  stock  mark 
and  hold  stock  within  those  limits. 

6.  Place  requisitions  for  reorder  with  the  pur- 
chasing executive  far  enough  in  advance  to 
insure   judicious    purchasing   and   receipt   of 
goods  before  stock  on  hand  is  exhausted. 

7.  Maintain  standards  established  by  standardiza- 
tion plans  by  seeing  that  the  correct  name  and 
description  of  all  material  for  reorder  are  fur- 
nished fully  to  the  purchasing  executive. 

Receiving. — A  receiving  department  is  an  impor- 
tant adjunct  to  the  stores  department,  but,  in  all 
except  very  large  organizations,  the  department  is 
one  in  name  only.  Receiving  and  shipping  are  gen- 
erally done  by  the  shipping  department.  Boxes, 
crates,  barrels,  etc.,  are  received  and  entered  upon 
a  receiving  report  in  duplicate.  The  duplicate  is 
filed  in  the  receiving  file  of  the  shipping  depart- 
ment while  the  original  is  sent  to  the  storeroom  at- 


STOEES  171 

tached  to  the  material.  Here  the  storeroom  receiv- 
ing clerk  opens  the  packages  and  checks  the  contents 
with  the  order.  This  method,  while  it  eliminates  the 
incidental  cost  of  labor,  saving  of  floor  space,  etc., 
which  would  be  necessary  if  receipts  are  checked 
first  in  the  receiving  department  and  then  in  the 
storeroom,  does  not  provide  a  double  check  upon 
receipts.  The  maintaining  of  a  regular  receiving 
department  where  materials  are  inspected,  counted 
and  weighed  as  soon  as  received,  has  the  distinct 
advantage  of  furnishing  additional  check  on  orders. 
In  case  of  disputes  with  outside  concerns  as  to  the 
amounts  delivered,  the  evidence  of  two  distinct  de- 
partments is  doubly  reliable.  Much  can  be  said 
for  the  double  check  when  its  cost  of  maintenance  is 
not  out  of  proportion  to  its  value. 

All  goods  received  in  the  storeroom  must  be 
counted  and  checked  before  storing  and  the  same  op- 
eration in  the  receiving  room  would  amount  to  ex- 
act duplication  of  work.  An  accurate  count,  checked 
with  order  or  invoice,  is  all,  under  ordinary  condi- 
tions, that  is  demanded  by  the  average  business 
house.  The  custom  of  some  firms  to  omit  the 
amount  ordered  from  the  receiving  clerk's  copy  of 
the  order  to  insure  careful  counting  seems  rather 
useless.  Inefficiency  on  the  part  of  a  clerk  is  better 
remedied  by  replacement. 

Sources  of  Indirect  Loss.— Even  in  the  most  mod- 
ern of  business  managements  there  are  innumer- 
able sources  of  indirect  loss.  Many  of  these  are  so 
small  as  to  be  almost  impossible  of  discovery. 


172      THE  SCIENCE  OF  PUECHASING 

There  are  however,  three  great  sources  of  loss  that 
are  without  doubt  present  to  some  degree  in  all 
manufacturing  concerns. 

(a)  A  Lack  of  a  Standard  of  Output. — This 
makes  it  impossible  to  establish  a  standard 
of  consumption  and  forces  the  stores  de- 
partment to  carry  a  heavier  stock  than  ne- 
cessary.   Excessive  stock  means: 

1.  Wasteful  employment  of  working  capital. 

2.  Interest  on  excessive  investment. 

3.  Insurance  on  large  quantity  of  stores. 

4.  Heavy  depreciation  on  materials. 

(b)  Shortage  of  Materials  and  Supplies. — Con- 
tinuity of  operation  which,  in  manufactur- 
ing efficiency,  depends  upon  the  availability 
of  materials  and  supplies  at  the  moment 
they  are  required.     Shortage  or  absence  of 
needed  materials  affects  profits  through: 

1.  Production  delays. 

2.  Piling  up  of  overhead. 

3.  Discouragement  of  workmen  through  lay- 
off. 

4.  Interference  with  standard  of  output. 

(c)  Mismanagement  of  materials. — This  means 
more    than    losses    through    theft,    waste, 
breakage  and  general  bad  handling  in  the 
storeroom,  all  of  which  is  the  direct  respon- 
sibility of  the  storekeeper  or  stock  clerk. 
An    efficient    storekeeper,    working    on    a 
satisfactory  system  of  stock  keeping  and 
perpetual  inventory,  is  very  often  able  to 


STORES  173 

stop  all  leakage  chargeable  to  the  stores 
department.  But  mismanagement  of  ma- 
terials is  traceable  to  the  engineering,  pur- 
chasing, manufacturing,  and,  in  a  lesser 
degree,  to  the  stores  department.  It  means 
indirect  losses  through : 

1.  Poor  selection  of  materials. 

2.  Injudicious   assigning   of   materials   pur- 
chased. 

3.  Incompetent  using  of  materials  assigned. 

Elimination  of  Indirect  Losses. — In  tracing  the 
three  major  losses  to  their  proper  sources,  mod- 
ern business  has  sought  and  discovered  means 
whereby  these  losses  may  be  reduced  to  a  mini- 
mum. 

(a)  'Quantity  of  Output. — A  standard  quantity 
of  output  should  be  decided  upon  by  the 
production  department  in  cooperation  with 
other  departments,  that  is,  manufacturing, 
sales,  purchasing,  etc.    This  sets  a  stand- 
ard of  consumption  and  eliminates: 

1.  Carrying  of  excessive  stock. 

2.  Wasteful  employment  of  working  capital. 

3.  Danger  of  shortage  of  materials  and  sup- 
plies. 

( b)  Control  of  Stores. — Stores  should  be  rigidly 
controlled  by  the  following  methods: 

1.  Consolidate  all  materials  and  supplies  in 
one,  or  more,  centrally  located  storeroom. 


174      THE  SCIENCE  OF  PURCHASING 

2.  Close  this  room  off  from  the  rest  of  the 
factory. 

3.  Put  a  storekeeper  in  absolute  charge. 

4.  Allow  no  material  to  be  given  out  without 
written  authority  signed  by  the  proper  per- 
son. 

5.  Provide   suitable   storage  place  for   each 
class  of  material. 

6.  Provide   suitable   filing   and   indexing   of 
stores  along  the  lines  of  perpetual  inven- 
tory. 

7.  Establish  a  definite  maximum,  normal  and 
minimum  stock  limit  according  to  the  quan- 
tity of  each  material  used  over  a  given 
period.     (Low  limit  should  allow  the  pur- 
chasing executive  to  get  estimates  before 
placing  reorders.) 

(c)  Management. — Materials  should  be  eco- 
nomically managed.  For  the  promotion  of 
economy,  the  following  four  points  are  es- 
sential : 

1.  Materials  must  be  properly  purchased,  re- 
ceived, checked,  stored  and  issued.     This 
is  the  responsibility  of  the  purchasing  and 
stores  departments. 

2.  They  must  be  properly  assigned  in  order 
that  the  desired  quality  of  output  be  pro- 
duced in  direct  ratio  to  the  actual  value  of 
the  material  used.     This  is  the  responsi- 
bility of  the  engineering,  purchasing  and 
manufacturing  departments. 


8TOEES  175 

3.  The  value  of  the  finished  product  must  com- 
pare favorably  with  the  actual  cost  of  the 
material  that  goes  into  it.    This  is  the 
responsibility  of  the  engineering,  purchas- 
ing and  manufacturing  departments. 

4.  A  certain  standard  quantity  of  finished 
product  must  result  from  a  relative  quan- 
tity   of   primary   material.    This   is    the 
responsibility  of  every  employee  in  every 
department  where  materials  are  handled. 


CHAPTER  XIV 
INVENTORY 

Importance  of  Inventory. — It  is  estimated  that 
from  30  per  cent  to  60  per  cent  of  a  firm's  capital 
is  invested  in  materials  and  supplies.  Of  this,  20  per 
cent  to  40  per  cent  is  in  real  estate  and  equipment 
and  the  balance  is  in  operating  expenses,  accounts 
payable,  etc.  Division  of  the  capital  investment 
differs  with  different  types  of  business,  but  accurate 
knowledge  of  the  distribution  and  disbursement  of 
assets  is  vital  to  business  success.  Lack  of  accurate 
knowledge  is  frequently  the  cause  of  bankruptcy. 

Because  of  the  large  amount  of  capital  that  must 
be  invested  each  year  in  materials  and  supplies,  in- 
ventory and  stores  are,  as  a  rule,  linked  together. 
Taken  by  and  large,  real  estate  and  equipment  are 
more  or  less  staple,  while  materials  and  supplies 
constitute  movable  possessions  and  are  constantly 
changing. 

Formerly,  it  was  the  custom  in  the  majority  of 
large  manufacturing  establishments,  to  shut  down 
for  a  period  of  greater  or  less  duration,  usually 
ranging  from  two  or  three  days  to  as  many  weeks, 
for  the  purpose  of  taking  inventory.  Since  it  was 
considered  necessary  to  shut  down  for  this  purpose, 
inventories  were  taken  but  once  or  twice  a  year. 

176 


INVENTORY  177 

The  enforced  inactivity  of  machinery,  materials  and 
men,  with  its  accompanying  piling  up  of  overhead, 
made  this  procedure  one  of  great  expense. 

Modern  business,  however,  has  devised  methods 
which  allow  of  perpetual  inventory  of  materials  and 
supplies  in  the  stores  department  and  the  listing 
and  pricing  of  other  physical  properties  without  per- 
ceptible interruption  of  operation.  There  are  dif- 
ferent methods  employed  by  different  types  of  busi- 
ness by  which  a  complete  inventory  may  be  taken  at 
frequent  intervals  with  comparatively  little  cost. 
All  of  these  methods  include  some  system  of  stock 
recording  which  allows  of  a  running  inventory. 

Essentials  of  Plant  and  Material  Inventory. — A 
complete  inventory  takes  in  all  physical  properties, 
equipment,  tools,  drawings,  patterns,  work  in  proc- 
ess, unsold  manufactured  products,  and  operating 
materials  and  supplies.  All  properties,  except  ma- 
terials and  supplies,  are  valued  in  the  inventory  at 
the  cost  of  reproduction  less  depreciation.  Materi- 
als and  supplies,  on  the  other  hand,  are  generally 
inventoried  at  the  actual  cost  at  the  time  of  pur- 
chase, no  matter  what  the  market  value  may  be  at 
the  time  of  inventory.  A  surplus  of  some  com- 
modity, the  price  of  which  has  fallen  appreciably 
since  the  purchase  was  made,  appears  on  the  in- 
ventory as  so  much  capital  tied  up  unnecessarily. 

The  rate  of  depreciation  of  physical  properties, 
except  materials  and  supplies,  depends  upon  the  na- 
ture of  the  property  and  is,  as  a  rule,  figured  on  a 
yearly  basis  and  prorated  over  monthly  or  quarterly 


178      THE  SCIENCE  OF  PURCHASING 

periods.  Motor  trucks,  for  example,  must,  under 
ordinary  treatment,  be  replaced  at  the  end  of  three 
years.  Depreciation  is  figured  at  33%  per  cent  per 
year.  Machinery,  which  is  estimated  or  known  by 
experience  to  require  renewing  at  the  end  of  five 
years,  is  said  to  depreciate  at  the  rate  of  20  per 
cent.  Five  per  cent  is  generally  conceded  to  cover 
depreciation  of  buildings. 

Material  Inventory— Perpetual  and  Physical.-— 
No  manufacturer  would  go  on  issuing  checks  against 
an  unknown  bank  balance.  Nor,  if  he  found  his 
accounts  payable  at  any  time  likely  to  exceed  his  cash 
accounts,  would  he  delay  to  make  provision  for  an 
adequate  supply  before  the  arrival  of  the  due  date. 

Stock  records,  commonly  referred  to  as  perpetual 
inventory,  provide  the  manufacturer  with  a  running 
record  of  receipts  and  issuance.  By  referring  to 
the  stock  records  he  may  estimate  the  amount  of 
goods  on  hand  just  as  he  might  estimate  the  amount 
of  cash  to  his  account  in  the  bank  by  looking  over 
his  check  stubs.  But  perpetual  inventories  require 
perpetual  attention.  They  should  be  balanced,  as 
a  bank  book  is  balanced,  at  frequent  intervals.  A 
running  inventory  is  theoretically  correct,  but,  in 
practice,  if  left  without  check  for  any  length  of 
time,  it  is  generally  found  to  disagree  with  the 
actual  amount  of  goods  in  stock. 

Kegarded  in  its  proper  functional  relation,  a  per- 
petual inventory  is  nothing  more  or  less  than  an  ac- 
curate accounting  of  all  goods  that  come  into  or 
go  out  of  the  establishment.  These  records  should 


INVENTORY  179 

be  checked  by  physical  count  with  such  regularity 
that  the  figures  thereon  may  safely  be  considered 
as  exhibiting  a  correct  inventory.  The  difficulties, 
and  there  have  been  many  in  the  handling  of  such 
records,  have  been  largely  due  to  lack  of  attention 
on  the  part  of  employees.  The  idea  that  a  "per- 
fect system"  is  in  operation  has  often  inclined  em- 
ployees to  let  it  operate  itself — which  is,  of  course, 
an  absurdity. 

Purpose  of  Perpetual  Inventory.— Practically 
every  business  requires  a  different  system  of  stock 
recording,  governed  by  the  type  and  character  of 
the  business,  its  general  policy,  its  plans  and  its 
departmental  methods  of  management.  But  with- 
out exception  some  comprehensive  record  of  stock 
is  of  vital  necessity.  Whatever  the  system  em- 
ployed, the  purpose  of  a  running  inventory  is  as 
follows : 

1.  To  furnish  accurate  information  as  to  move- 
ment of  stock. 

2.  To  aid  in  rigid  control  of  materials  and  sup- 
plies. 

3.  To  assist  in  the  scientific  establishment  of  nor- 
mal, maximum  and  minimum  stock  levels. 

4.  To  record  all  goods  received. 

5.  To  account  for  all  disbursements. 

6.  To  assure  continuity  of  plant  operation  by 
maintenance  of  stock. 

7.  To  guard  against  useless  tying  up  of  capital 
in  excessive  stock. 


180      THE  SCIENCE  OF  PURCHASING 

8.  To  facilitate  physical  inventory. 

A  theoretical  stock  record  or  perpetual  inventory 
might  be  outlined  which  would,  on  the  surface,  ap- 
pear to  afford  a  perfect  record.  But  theories  are 
generally  impractical  when  applied.  Knowing  the 
purpose  of  stock  records,  it  is  possible  for  each  busi- 
ness to  plan  its  system  in  such  a  manner  that  it  will 
amalgamate  all  the  requirements  in  a  coherent  mass. 
The  installation  of  any  system  requires  judgment  of 
the  highest  order.  The  comprehensive,  accurate  and 
systematic  recording  of  stock  demands  thought,  ac- 
tion and  perpetual  attention. 

Stock  Levels. — The  establishment  of  stock  levels 
calls  for  the  heartiest  cooperation  between  the  manu- 
facturing, engineering,  purchasing  and  stores  de- 
partments. Consideration  must  be  given  to : 

1.  Size  and  nature  of  the  business   (seasonal 
requirements,  etc.). 

2.  Character  of  materials  and  supplies. 

3.  Time  required  for  manufacture  or  delivery 
of  commodities. 

4.  Market  conditions. 

5.  Rate  of  sales. 

6.  Rate  of  production. 

7.  Aims,  plans  and  finances  of  the  firm. 

The  perpetual  inventory  is  of  measureless  value 
as  a  basis  from  which  to  calculate  material  and  sup- 
ply requirements.    If  the  standard  of  output  re- 
mains stationary  the  inventory  will  show  a  uniform- 
ity of  disbursements  and  the  stock  levels  will  of 


INVENTORY  181 

necessity  remain  stationary.  If  the  rate  of  sales, 
and  therefore  the  rate  of  production,  fluctuates  with 
any  degree  of  regularity  the  material  and  supply 
requirements  must  be  higher  at  one  period  and  lower 
at  another. 

The  normal  stock  level  should  represent  the  quan- 
tity that  would  be  sufficient  to  supply  the  demand 
for  a  certain  period  or  for  a  certain  number  of  units 
to  be  manufactured.  The  minimum  limit  serves  as 
low  stock  mark  and  the  maximum  as  the  highest. 
Many  firms  consider  the  minimum  level  as  the  point 
at  which  reorders  should  be  placed.  Others  place 
this  low  level  as  the  danger  mark  to  be  avoided,  ex- 
cept in  times  of  extremely  unsettled  market  con- 
ditions and  in  anticipation  of  curtailment  of  output. 
Still  others  believe  that  the  stock  levels  should  cor- 
respond with  the  rate  of  sales  and  production,  in 
which  event  the  minimum  stock  limit  would  be  in 
direct  ratio  to  the  minimum  sales,  while  the  maxi- 
mum would  conform  with  the  high  mark  in  sell- 
ing the  product. 

The  necessity  in  regard  to  stock  is  to  have  materi- 
als when  wanted.  It  is  better  to  carry  quantities 
in  excess  of  needs  than  to  run  short,  but  in  the 
greater  number  of  cases  the  running  record  of  re- 
ceipts and  disbursements  will  aid  materially  in  ob- 
viating the  danger  of  getting  materials  in  excess  of 
actual  consumption. 

The  thermometer  of  quality  runs  up  or  down  ac- 
cording to  the  length  of  time  it  takes  to  get  materi- 
als. If  the  commodity  is  purchased  from  a  firm  in 


182      THE  SCIENCE  OF  PUKCHASING 

a  distant  city,  or  if  time  must  be  allowed  for  the 
manufacture  of  the  article,  the  thermometer  goes 
up.  If  the  degree  of  dependability  of  the  source 
of  supply  is  doubtful  or  unknown,  the  thermometer 
goes  up.  On  the  other  hand,  when  purchases  of  a 
standard  article  are  made  from  a  firm  of  known  de- 
pendability in  close  proximity  to  the  delivery  point, 
the  thermometer  goes  down.  The  date  of  placing 
the  requisition  with  the  purchasing  executive  should 
appear  on  the  inventory  card  together  with  the  date 
of  receipt.  In  this  way,  all  necessary  data  for  the 
scientific  establishment  of  stock  levels  may  be  kept 
upon  the  running  record  in  the  stores  department. 
The  storekeeper  must  work  close  to  the  purchasing 
executive  in  keeping  stock  at  the  proper  level  at  all 
seasons  and  under  all  conditions. 

Purchasing  Executive's  Relation  to  Inventory. — 
Theoretically,  the  purchasing  executive  of  a  large 
manufacturing  establishment  has  no  concern  with 
the  physical  inventory  of  stock.  It  is  the  duty  of 
the  purchasing  department  to  buy  materials  and 
supplies  upon  request  and  to  see  that  these  pur- 
chases are  delivered  as  ordered.  The  active  re- 
sponsibility of  the  purchasing  executive  ends  upon 
the  receipt  of  notice  from  the  receiving  clerk  or 
storekeeper  that  the  order  is  completed. 

In  practice,  however,  stock  inventory  plays  an 
important  part  in  successful  purchasing.  Perpetual 
inventory  serves  as  a  base  from  which  the  purchas- 
ing executive  may  work  in  calculating  his  firm's 
probable  requirements  over  a  period  of  the  same 


INVENTOEY  183 

length  as  that  covered  by  the  inventory.  Materials 
and  supplies  received  and  consumed  appear  on  the 
daily  or  weekly  reports  from  the  stores  department, 
copies  of  which  are  usually  filed  in  the  purchasing 
department.  Additions  and  subtractions  made  from 
these  figures  will  give  the  purchasing  executive  a 
fairly  accurate  working  knowledge  of  the  quantities 
that  should  be  on  hand  at  any  time. 

Actual  physical  count,  when  compared  with  these 
deductions,  will  enable  him  to  judge  as  to  the  effici- 
ency of  the  stores  management.  Marked  discrep- 
ancies between  the  perpetual  inventory  and  the 
physical  inventory  serve  as  a  warning  that  stores 
are  not  rigidly  controlled  or  that  records  are  care- 
lessly kept.  A  surplusage  of  one  article  attd  a 
scarcity  of  another,  when  consumption  is  known  to 
be  comparatively  uniform,  will  tell  the  purchasing 
executive  that  stock  levels  are  not  evenly  balanced. 

Accurately  kept  inventory  and  frequent  physical 
count  are  of  vital  necessity  to  the  purchasing  ex- 
ecutive, and  should  be  considered  as  a  record  of 
past,  and  a  guide  to  future,  purchases. 

Stores  Department's  Relation  to  Inventory.— 
Upon  reporting  to  the  purchasing  executive  that 
the  order  is  "  completed, "  the  storekeeper  automatic- 
ally assumes  responsibility  for  the  goods  received. 
It  is  the  duty  of  his  department  to  care  for  all 
materials  and  supplies  until  they  are  passed  on  to  the 
consuming  departments.  The  bins  and  racks  con- 
taining the  goods  should  be  arranged  so  that  the 
storekeeper  o.an,  at  a  glance,  tell  how  his  supply  is 


184      THE  SCIENCE  OF  PURCHASING 

holding  out.  But  records  should  be  kept  of  re- 
ceipts and  issues  in  order  that  exact  amounts  of  stock 
on  hand  may  be  found  without  referring  to  the 
bins  or  racks.  The  more  systematic  and  compre- 
hensive these  records  are,  the  more  valuable  they 
are  to  the  storekeeper  as  well  as  to  the  purchasing 
executive,  cost  accountant,  and  other  executives 
of  the  firm. 

But  in  taking  actual  physical  inventory,  the  store- 
keeper is  responsible  only  for  the  actual  amount 
of  each  item  in  the  storeroom.  Issuance  presup- 
poses that  materials  are  to  be  used  for  the  proper 
purposes  and  will  be  accounted  for  as  a  part  of  the 
finished  cost.  With  the  filling  of  the  requisition 
and  proper  recording  of  the  material  issued,  the 
stores  department  may  be  said  to  have  performed 
its  duty.  Issued  goods  cease  to  be  the  concern  of 
the  stores  department  at  the  moment  of  issue. 
Only  materials  remaining  in  the  stores  appear  on 
the  inventory  as  chargeable  to  the  stores  depart- 
ment. 

Storekeeper  as  an  Aid  to  Physical  Count. — The 
running  account  of  all  materials  should  be  checked 
by  physical  inventory.  This  necessity  cannot  be 
overstated.  Since  it  is  the  function  of  the  stores 
department  to  record  receipts  and  issuance,  the 
storekeeper  is  the  logical  man  to  oversee  the  count- 
ing of  goods  on  hand.  If  certain  items  are  checked 
every  day  in  regular  order,  so  that  each  article 
will  be  inventoried  at  least  once  a  year,  there  will 
be  no  need  of  suspending  plant  operation  even  for 


INVENTORY  185 

a  few  hours  while  the  count  is  taken.  The  best 
time  to  do  this  is  when  the  balance  of  any  particu- 
lar item  is  at  its  minimum  limit. 

In  any  event,  everything  should  be  arranged  to 
facilitate  inventory.  The  goods,  when  possible, 
should  be  stacked  so  that  the  number  of  units  in 
each  layer  consists  of  a  certain  known  number.  A 
clerk  may  then  make  the  count,  entering  the  quan- 
tity on  cards  bearing  the  name  and  description  of 
each  item.  This  card  should  be  placed  in  a  con- 
spicuous spot,  either  on  the  stack  or  on  the  empty 
rack  from  which  the  stock  was  taken.  Any  goods 
issued  after  the  count  should  be  entered  on  this 
card  in  red  ink,  stating  the  amount,  date  and  hour 
of  issue.  At  the  end  of  the  day,  when  the  plant  is 
closed,  a  clerk  may  go  through  the  storeroom,  mak- 
ing proper  deductions  on  the  cards  and  entering  the 
actual  amount  upon  the  inventory  sheet. 

It  is  well  for  the  storekeeper  to  check  the  result  of 
the  count  with  his  running  inventory.  This  will 
aid  him  in  detecting  leakage,  carelessness  and  mis- 
use of  materials  under  his  care.  The  act  of  check- 
ing assists  him  in  visualizing  discrepancies,  and  any 
unusual  latitude  between  the  perpetual  and  the  phy- 
sical inventory  will  be  observed  and  steps  may  be 
taken  to  discover  the  reason.  The  running  inven- 
tory should  be  made  to  agree  with  the  actual  amount 
on  hand  after  the  cause  of  the  discrepancy  has  been 
determined. 


CHAPTER  XV 
STANDARDIZATION 

Why  the  Purchasing  Executive  Is  Concerned  with 
Standardization.— The  idea  that  the  function  of  pur- 
chasing is  to  buy,  at  the  lowest  possible  price,  any 
and  all  commodities  requisitioned  by  foremen 
through  their  department  heads,  has  been  revised. 
Far  from  being  a  mere  order  clerk,  the  purchasing 
executive  has  risen  to  a  position  of  director  and  ad- 
viser to  his  entire  organization.  His  department 
records  the  functioning  of  the  various  organs  in  the 
body  of  his  factory,  from  the  consumption  of  printed 
forms  to  the  purchasing  of  necessary  manufactur- 
ing equipment  recommended  by  the  chief  engineer. 

By  watching  the  requisitions  which  come  to  his 
desk,  he  may  keep  his  fingers  upon  the  throbbing 
pulse  of  his  firm.  Requisitions  for  paper  and  printed 
matter  give  him  a  clear  idea  of  the  office  systems  in 
operation  in  each  department;  requisitions  for  pri- 
mary materials  tell  him  the  rate  of  production  and 
of  sales ;  requisitions  for  supplies  and  repair  parts 
tell  him  what  type  of  machine  is  most  economically 
operated  and  what  parts  are  most  susceptible  to 
breakage,  wear,  etc.  Without  other  basis  for 
knowledge,  the  purchasing  executive  may  learn  from 
requisitions  whether  or  not  his  firm  is  operating 

186 


STANDARDIZATION  187 

upon  complete  standardization  plans  and  how  rig- 
idly these  plans  are  adhered  to  by  the  different  de- 
partments, i 

Requisitions  for  purchase  must  pass  across  the 
purchasing  executive's  desk  before  they  can  reach 
the  seller,  and  it  is  his  duty  to  reduce  the  number 
and  variety  of  these  requests  as  much  as  possible. 
This  he  must  do,  not  by  refusing  to  purchase  materi- 
als or  supplies,  but  by  studying  the  needs  and 
methods  of  his  firm,  suggesting  economical  substi- 
tutions, advising  simpler  methods,  and  otherwise 
aiding  in  the  perfecting  of  systems  and  processes 
which  utilize  purchased  materials.  He  may  estimate 
the  rate  of  consumption  of  raw  materials  and  buy  in 
larger  quantities  at  lower  prices,  thus  saving  the 
time  required  to  handle  a  number  of  small  orders, 
also  he  may  cooperate  with  the  engineering  depart- 
ment in  evolving  plans  whereby  equipment  may  be 
standardized,  standard  parts  adapted  to  special 
needs  and  supplies  made  interchangeable. 

In  general,  therefore,  the  purchasing  executive's 
office,  properly  considered,  acts  as  a  gauge  and  in- 
dicator of  the  status  of  the  business,  and  provides 
the  purchasing  executive  who  has  vision  with  a 
means  of  becoming  important  in  the  higher  coun- 
cils of  his  firm  which  he  should  prepare  himself  to 
use. 

Vital  Necessity  for  Standardization.— A  standard 
is  a  unit  of  measurement  which  is  steady  and  firm. 
It  serves  as  a  sample  analysis  to  which  all  actions 
must  conform.  No  modern  business  man  would  at- 


188      THE  SCIENCE  OF  PURCHASING 

tempt  to  operate  a  business  without  a  complete  set 
of  general  standards  including : 

1.  Policies  toward  consumers. 

2.  Advertising  and  sales  methods. 

3.  Salaries  and  commissions  of  employees. 

4.  Departmental  systems  and  forms. 

5.  Quality  and  quantity  of  output. 

6.  Consumption  of  primary  materials  and  sup- 
plies. 

Yet  many  modern  business  houses,  while  develop- 
ing standardization  to  its  extreme  limit  in  matters 
touching  even  indirectly  upon  the  consumer,  neglect 
the  inner  workings  of  their  factories.  The  sales- 
manager  knows  precisely  what  his  men  are  doing 
and  how  they  are  doing  it,  because  salesmanship  has 
been  standardized.  The  production  manager  knows 
the  quality  and  quantity  of  finished  articles  to  be 
produced  in  a  given  length  of  time,  because  extent 
and  value  of  output  have  been  standardized.  The 
office  manager  knows  that  certain  records  will  be 
written  and  filed  in  a  certain  way,  since  systems 
and  forms  have  been  standardized.  But  the  pur- 
chasing executive,  whose  duty  it  is  to  keep  his 
factory  in  operation  according  to  schedule,  the  sales 
up  to  expectations,  the  office  supplied  with  proper 
forms,  etc.,  often  works  in  a  chaos  of  unrelated 
facts,  because  standardization  has  not  been  carried 
down  to  operating  equipment. 

Especially  does  the  purchasing  executive  of  a 
large  corporation  suffer  from  lack  of  standardiza- 


STANDAEDIZATION  189 

tion.  A  number  of  small  factories  brought  to- 
gether under  one  centralized  purchasing  department 
multiplies  the  difficulties  of  the  executive,  not  by 
the  number  of  factories  but  by  the  number  of  differ- 
ent articles  of  equipment  operating  in  each  factory. 
Standardization,  while  advisable  for  the  small  firm 
owning  a  single  plant,  is  of  vital  necessity  to  the 
successful  operation  of  the  corporation.  The  pur- 
chasing executive,  being  the  chief  sufferer,  should 
insist  upon  the  cooperation  of  all  members  of  the 
organization  in  the  adopting  of  standards  in  all 
branches  of  the  business. 

Beginning  Standardization  with  Catalogues  and 
Forms. — For  many  years  attempts  have  been  made 
by  various  trade  organizations  to  arrive  at  a  stand- 
ard size  of  catalogue  for  the  purpose  of  expediting 
the  filing  and  finding  of  items  desired.  Earlier 
failures  are  due,  in  part,  to  the  fact  that  efforts 
were  confined  to  specific  trades  and  not  to  the  gen- 
eralization of  the  standard.  For  obvious  reasons, 
the  National  Association  of  Purchasing  Agents  has 
succeeded  where  others  have  failed.  A  Standard- 
ization Committee  was  appointed  by  each  local 
branch  of  this  organization  and  individual  members 
were  invited  to  make  suggestions  and  state  objec- 
tions, etc.  The  result  of  local  cooperation  was  sub- 
mitted to  the  Standardization  Committee  represent- 
ing the  organization  as  a  whole. 

After  careful  consideration  of  all  phases  of  the 
question,  a  National  Standard  Catalogue  7%  by 
10%  inches,  was  recommended  by  this  committee  and 


190      THE  SCIENCE  OF  PURCHASING 

this  size  is  gradually  being  adopted  by  leading  trade 
organizations  throughout  the  country.  The  size 
recommended  fits  into  the  standard  letter  file.  It 
can  be  doubled  or  halved  without  losing  its  relative 
proportions  of  length  and  width.  It  is  cut  out  of 
the  standard  sheet  of  paper,  32  by  44  inches,  with 
a  minimum  of  waste.  For  these  and  other  equally 
weighty  reasons,  this  size  was  adopted  in  prefer- 
erence  to  the  suggested  6  by  9  or  8  by  11 
which,  though  they  contained  some  of  the  ad- 
vantages of  the  size  adopted,  did  not  embody 
all. 

Having  accomplished  much  in  the  matter  of  stand- 
ardization of  catalogues,  this  organization  took  up 
the  question  of  forms.  Invoices  have  been  decided 
upon,  purchase  orders  and  other  forms  are  under 
discussion  at  this  writing,  and  standards  will  be 
recommended  after  a  thorough  analysis  and  dis- 
cussion of  forms  in  use  and  suggested  improve- 
ments. Packing  and  pricing  of  articles,  not  by 
dozens  and  gross,  but  by  the  decimal  system  of 
single  articles,  tens  and  hundreds,  are  also  under 
discussion. 

Standard  Invoice.— In  October,  1920,  after  a  year 
of  intensive  study  by  the  Standardization  Commit- 
tee of  the  National  Association  of  Purchasing 
Agents,  the  standard  invoice,  (a  reproduction  of 
which  is  shown  herewith),  was  recommended  and 
adopted.  In  discussing  this  question,  it  was  found 
that  the  old  method  of  invoice  demands  some  fifty- 
one  sizes  of  presses  and  eighty  or  more  sizes  of 


STANDARDIZATION  191 

folding  and  cutting  machines.  This  increased  the 
expense  of  printing  and  also  wasted  paper. 

The  matter  was  considered  from  three  funda- 
mental points:  (1)  paper  size;  (2)  formulae;  (3) 
paper  weight.  A  tentative  form  was  drawn  up 
and  submitted  to  the  members  of  the  organization 
through  the  pages  of  its  magazine  and  opinions  were 
requested.  Consideration  was  given  to  all  points 
brought  to  the  notice  of  the  committee  through 
whatever  channel.  It  cooperated  in  every  way  pos- 
sible with  the  individuals  and  organizations  pre- 
senting definite  ideas  upon  the  subject  and  its  rec- 
ommendation of  a  standard  invoice  embodied  a 
summary  of  all  suggestions,  reduced  to  a  workable 
and  practical  design. 

The  size  recommended  is  8%  inches  wide  by  not 
less  than  7,  and  not  more  than  14,  inches  long.  The 
idea  is  that  any  invoice  between  7  and  14  inches  can 
be  folded  back  so  that  the  7-inch  dimension  may  be 
retained  for  filing.  A  tolerance  of  %  inch  either 
way  is  allowed  on  the  recommended  dimension  to 
provide  for  trim  where  necessary. 

All  the  data  given  on  the  invoice  may  not  be 
required  by  all  concerns  for  their  accounting  routine, 
and  in  such  cases  the  spaces  need  not  be  used.  The 
printed  data  as  given  in  the  invoice  will  permit  the 
form  to  be  used  for  purchases  by  railroads  and  large 
industrial  corporations  and  will  obviate  the  neces- 
sity of  rubber-stamp  impressions. 

Purchasing  Executive  as  a  Balance  to  the 
Engineer. — Scientific  purchasing,  if  begun  at  the 


192      THE  SCIENCE  OF  PURCHASING 

birth  of  the  business,  will  assure  standardization 
throughout  the  plant.  The  purchasing  executive, 
knowing  the  aims  and  plans  of  his  firm,  can  develop 
cordial  relations  between  his  concern  and  a  few  of 
the  more  reliable  sellers,  thus  securing  their  co- 
operation in  establishing  standards.  In  case  of 
limited  capital,  a  corps  of  friendly  salesmen  are 
invaluable  in  suggesting  ways  and  means  of  reduc- 
ing initial  costs  and  holding  fast  to  standardization 
plans  at  the  same  time. 

There  is,  however,  a  constant  tendency  upon  the 
part  of  engineers,  foremen  and  those  using  equip- 
ment, to  specify  articles  not  standard  or  to  suggest 
changing  standards  without  due  consideration  of  all 
phases  of  the  change.  An  engineering  department 
that  is  too  ready  to  adopt  new  standards  is  even 
more  expensive  to  the  factory  than  one  which  refuses 
to  make  any  changes  at  all.  Intelligent  cooperation 
between  the  engineering  and  purchasing  depart- 
ments is  essential  at  any  stage  of  the  life  of  the 
business.  The  purchasing  executive  should  insist 
upon  being  present  at  all  conferences  between  engi- 
neering and  manufacturing  department  heads. 
With  all  their  specialized  knowledge,  some  efficiency 
engineers  are  notoriously  impractical.  Having  dis- 
covered some  new  labor-saving  device  and  proved 
that  it  will  work  out  in  practice  what  it  promises  in 
theory,  the  engineer  is  very  likely  to  consider  only 
the  saving  in  time  and  labor  costs,  utterly  failing  to 
see  the  initial  cost  of  the  device  or  to  realize  that 
there  may  be  reasons  why  such  a  device  will  not  pay 


STANDARDIZATION  193 

for  itself  under  conditions  existing  in  the  plant.  On 
the  other  hand,  he  may  see  economy  in  the  present 
by  refusing  to  approve  a  new  device  and  short- 
sightedly overlook  the  bearing  of  that  economy  upon 
the  future. 

The  analytical  power  and  foresight  of  the  purchas- 
ing executive  serves  as  a  balance  to  the  engineer, 
and  modern  business  management  has  come  to 
recognize  this  fact.  In  the  hands  of  the  engineer  is 
the  planning  of  the  factory,  the  selection  of  methods, 
etc.  He  tests  and  suggests  machinery  and  appli- 
ances with  an  eye  to  utility,  location,  etc.;  but  the 
final  decision,  in  many  live-wire  business  houses,  is 
up  to  the  purchasing  executive  who  knows  prices, 
processes  of  manufacture,  intended  use  of  each 
piece  of  equipment,  and  the  future  aims  and  plans 
of  his  firm. 

Do  Standards  Interfere  with  Progress.— The 
question  has  arisen:  Do  not  standards  of  equip- 
ment stand  in  the  way  of  progress  in  adopting  the 
best,  to-day? 

Standards  are  set,  as  a  rule,  by  the  engineering 
department  with  the  cooperation  of  the  manufactur- 
ing department,  or  other  departments  using  the 
equipment.  When  one  particular  article  is  found 
to  be  more  serviceable  than  another,  it  should  be 
adopted  as  standard.  When  a  still  better  article 
is  found  and  sufficiently  proved,  the  standard  should 
be  changed.  In  establishing  new  standards,  how- 
ever, inventory  should  be  taken  of  the  amount  of  the 
former  standard  on  hand  in  the  storeroom.  There- 


194      THE  SCIENCE  OF  PURCHASING 

fore,  it  is  advisable  to  make  changes  when  stock  is 
at  a  minimum.  It  must  be  decided  whether  the 
obsolete  stock  is  to  be  used  and  all  reorders  placed 
for  the  new  standard,  or  whether  it  is  advisable 
immediately  to  replace  all  existing  articles  of  the 
kind  for  the  new  standard.  The  latter  procedure 
should  be  followed  in  the  case  of  some  dangerously 
defective  article,  but  under  ordinary  conditions  the 
discarding  of  any  great  amount  of  stock  means 
heavy  expense  unless  the  article  is  such  that  it  may 
profitably  be  salvaged. 

A  stagnated  engineering  department,  satisfied 
with  the  service  of  one  standard  and  refusing  to 
recognize  the  forward  march  of  inventive  genius, 
will,  without  doubt,  stand  in  the  way  of  progress. 
But  this  is  not  the  result  of  standardization  but  of 
stagnation.  The  remedy  does  not  lie  in  the  elimina- 
tion of  standards,  but  in  infusing  new  blood  into 
the  department  controlling  standardization  plans. 
The  diplomatic  purchasing  executive  is  in  a  posi- 
tion to  offer  a  remedy  for  such  a  condition. 

Effect  of  Standardization  upon  Requisitors.— 
Within  the  organization,  standardization  has  its 
effect  upon  the  attitude  of  requisitors  toward  the 
purchasing  executive.  Returning  to  the  tendency  of 
requisitors  to  specify  articles  not  standard,  the  pur- 
chasing executive's  ability  to  manage  men  stands 
him  in  good  stead.  Oftentimes,  a  curt  refusal  to 
supply  the  article  specified,  together  with  the  in- 
formation that  an  article  of  another  manufacturer 
is  being  forwarded,  will  precipitate  a  long  and 


STANDARDIZATION  195 

wordy  discussion.  The  requisitor,  having  decided 
upon  the  article  specified  by  him,  will,  nine  times 
out  of  ten,  find  all  manner  of  fault  with  the  article 
substituted.  He  may  even  resort  to  dishonesty  or 
vandalism  in  order  to  salve  his  injured  feelings  and 
the  affront  to  his  judgment. 

A.  friendly  note  from  the  purchasing  executive, 
however,  stating  that,  much  to  his  regret,  the  article 
specified  cannot  be  furnished,  because  a  certain 
other  article  is  the  standard,  will  settle  the  question 
for  all  time.  The  requisitor  may  still  be  inclined  to 
doubt  the  wisdom  of  the  choice  of  standards,  but  he 
knows  better  than  to  insist  upon  the  delivery  of  the 
article  not  standard  without  weighty  reasons. 
There  are  innumerable  stories  told  by  seasoned  pur- 
chasing executives  about  factory  superintendents 
and  foremen  who  refuse  to  find  merit  in  any  but  the 
article  to  which  they  are  accustomed  from  habit. 
Various  methods  of  persuasion  are  applied  with 
indifferent  results.  One  purchasing  executive, 
weary  of  argument,  resorted  to  the  trick  of  placing 
the  label  from  the  article  praised  by  the  requisitor 
upon  the  standard  article.  The  ruse  worked,  and 
the  determined  requisitor  was  confronted  with  the 
proof  of  his  stubbornness. 

Effect  of  Standardization  upon  the  Seller-pur- 
chasing executives  have  been  knowir  to"  object  to 
standardization  on  the  grounds  that,  by  adopting 
one  manufacturer's  product  as  standard,  the  buyer 
puts  himself  at  the  mercy  of  the  seller  as  to  quality, 
price,  delivery  and  service.  These  men  reason  thus : 


196      THE  SCIENCE  OF  PURCHASING 

A  vender,  knowing  that  his  product  has  been  adopted 
as  the  standard  by  the  buyer,  knows  also  that  this 
standard  cannot  be  changed  without  considerable 
expense  and  trouble.  He  is  sure  of  his  market  and, 
in  time,  will  grow  careless  with  the  voluntary  orders 
from  that  firm.  Quality  is  likely  to  fall  below  that 
of  the  first  few  deliveries  and  prices  are  likely  to 
be  held  up  regardless  of  market  conditions. 

Such  a  condition  may  arise  upon  rare  occasions, 
but  certainly  it  cannot  be  said  to  be  of  sufficient 
frequency  to  warrant  the  adoption  of  many  models 
of  equipment.  In  establishing  standards,  it  is 
seldom  necessary  to  confine  the  source  of  supply  to 
one  vender.  In  fact,  it  is  seldom  advisable  to  do  this, 
lest  fire,  strike  or  other  disaster  overtake  the  vender. 
Every  purchasing  executive  should  provide  himself 
with  an  emergency  source  of  supply  whether  or  not 
his  factory  operates  upon  standardization  plans. 
This  division  of  purchases  acts  as  a  stimulant  for 
the  vender  and  keeps  him  on  the  alert.  The  name 
of  the  firm  standardizing  on  their  products  is 
frequently  used  by  sellers  in  sales  talks.  To  lose 
any  one  of  these  firms  would  call  for  explanations, 
and  if  the  change  in  standards  has  been  brought 
about  through  the  fault  of  the  seller,  the  truth  will 
almost  certainly  leak  out  sooner  or  later  and  busi- 
ness will  fall  off  as  a  direct  result. 

The  purchasing  executive  who  takes  the  seller  into 
his  confidence  and  asks  his  aid  in  establishing 
standards  will,  in  most  instances,  get  the  best  possi- 
ble price,  delivery  and  service.  He  should,  of 


STANDARDIZATION  197 

course,  take  all  possible  precaution  to  protect  him- 
self. Careful  checking  of  deliveries,  comparison  of 
goods  with  original  samples,  and  attention  to  the 
market  prices  of  raw  and  finished  materials  com- 
bined in  the  purchase  are  essential  to  right  buying 
at  all  times,  and  no  amount  of  confidence  in  the  seller 
can  eliminate  the  necessity  for  alertness  on  the  part 
of  the  buying  concern. 

Misuse  of  the  Word  "Standardization"  in  Price 
Baiting. — Some  few  purchasing  executives  have  used 
the  magic  words,  "We  hope  to  standardize  on  your 
product  if  the  price  is  right,"  in  an  effort  to  squeeze 
a  lower  price  from  the  salesman.  To  say  that  an 
article  is  being  adopted  as  standard  implies  that 
a  large  quantity  will  be  purchased  throughout  the 
year.  If  this  implication  is  correct,  there  is  no 
reason  why  the  purchasing  executive  should  not  get 
the  benefit  of  his  quantity  purchase.  But  many 
concerns,  while  actually  standardized,  have  need  for 
but  a  few  of  certain  articles  and  are  not  entitled 
to  the  quantity  price.  It  is  not  the  fact  that 
standards  are  established  that  causes  the  seller  to 
make  price  concessions,  but  the  promise  of  an 
assured  market  for  a  large  quantity  of  his  pro- 
duct. 

The  purchasing  executive  who  deliberately  sets 
about  misleading  the  salesman  by  resorting  to 
methods  as  nearly  sharp  in  practice  as  is  the  misuse 
of  standardization  promises,  will  find,  in  the  final 
analysis,  that  he  has  lost  a  dollar's  worth  of  valu- 
able confidence  for  every  penny  he  has  saved. 


198      THE  SCIENCE  OF  PURCHASING 

Effect  of  Standardization  upon  Storekeeping.-— 

The  storekeeper  is  one  of  the  greatest  sufferers  from 
multiplicity  of  models  of  equipment  in  factory 
operation.  The  purpose  of  the  stores  department  is 
to  maintain  stock  available  for  every  emergency.  A 
plant  operating  with  machinery  of  different  manu- 
facture serving  the  same  purpose,  but  demanding 
different  types  of  supplies,  multiplies  {he  number 
of  articles  in  the  storeroom.  These  must  be  re- 
ceived, checked,  stored  and  issued  and  a  perpetual 
inventory  kept  of  each.  The  work  of  the  store- 
keeper and  the  number  of  assistants  he  must  employ 
depends  largely  upon  the  number  of  articles  to  be 
kept  in  stock. 

Standards,  when  established,  considerably  reduce 
the  cost  and  amount  of  stock  to  be  maintained  and 
greatly  assist  in  storekeeping.  It  is  the  store- 
keeper's duty  to  check  the  tendency  of  requisitors  to 
specify  articles  not  standard  and  to  establish 
standards  where  they  are  not  already  prescribed; 
also,  to  call  attention  to  standards  that  work  against 
economy  in  the  use  of  materials.  In  this  he  may  be 
of  great  assistance  to  the  purchasing  executive  who, 
though  he  may  know  all  about  the  article  in  question 
and  understands  its  uses,  is  unable  to  keep  in  close 
touch  with  its  performance  in  relation  to  production. 

The  War  as  a  Stimulation  to  Standardization. — 
During  the  war,  the  purchasing  executive  was  com- 
pelled to  take  what  he  could  get  without  the  oppor- 
tunity to  pick  or  choose.  Enforced  conservation 
stimulated  sellers  to  reduce  the  number  of  their 


STANDARDIZATION  199 

standards;  production  was  limited;  deliveries  were 
a  matter  of  months;  and  factories  throughout  the 
country  were  confronted  with  idle  equipment,  idle 
men  and  delayed  production.  The  purchasing  ex- 
ecutive's desk  was  buried  in  a  sea  of  requisitions, 
all  of  them  marked  "rush."  Typewriter  and  tele- 
phone worked  frantically  in  an  attempt  to  locate 
necessary  materials  and  supplies.  In  the  store- 
room, shelves  and  bins  were  running  over  with  sup- 
plies that  could  not  be  used  and  short  of  equipment 
that  should  be  there.  With  pencil  and  paper 
engineers  often  figured  far  into  the  night,  trying 
to  devise  methods  whereby  equipment  might  be 
changed  to  fit  available  parts,  or  parts  modified  to 
fit  equipment. 

But  out  of  the  chaos  of  wartime  confusion  came 
the  uniformity  of  order.  The  saying  that  necessity 
is  the  mother  of  invention  has  been  freshly  im- 
pressed upon  the  minds  of  every  one.  Salesmen 
assisted  with  practical  suggestions;  engineers 
sought  purchasing  executives  for  advice;  foremen 
tried  their  hands  at  patching  up  machines  which 
in  former  times  would  have  been  scrapped ;  coordin- 
ation and  cooperation  extended  to  the  farthest  corner 
of  the  factory  and  standardization  became  a  fact 
instead  of  a  theory  in  practically  all  modern  manu- 
factories. 


CHAPTER  XVI 
RECORDS  AND  FORMS 

Qualifications  of  an  Ideal  Purchasing  System.— 
Scientific  purchasing  lies  in  the  breadth  and  strength 
of  the  purchasing  executive's  judgment.  In  order 
to  exercise  this  judgment,  he  must  be  relieved  of  the 
minor  details  of  department  routine.  Many  pur- 
chasing executives  are  so  hampered  by  myriad  little 
things  that  they  have  neither  the  time  nor  the 
energy  to  devote  to  their  real  work.  For  this  rea- 
son, a  well-defined  purchasing  system  should  be  in- 
stalled which  will  reduce  clerical  routine  to  its  low- 
est denomination  and  free  the  purchasing  executive 
from  the  obstruction  of  misplaced  details. 

The  ideal  purchasing  system  records  every  es- 
sential fact,  with  a  minimum  of  labor,  and  in  such 
shape  that  it  is  instantly  available  as  a  basis  for 
intelligent  decision  and  action.  It  encompasses  con- 
tinuity of  facts  which  lead  from  the  requisition  to 
the  paying  of  the  invoice  with  information  available 
at  all  times  to  show  at  just  what  stage  the  trans- 
action has  arrived.  It  should  eliminate  guess  work 
and  make  the  knowledge  and  experience  of  the  de- 
partment a  matter  of  record  rather  than  of  recol- 
lection. It  should  insure  accuracy  on  prices,  quan- 
tities and  deliveries  and  automatically  prevent 

200 


EECORDS  AND  FORMS  201 

duplication    of    orders    and    twice-paid    invoices. 

No  system  can  attain  such  perfection  that  it  will 
run  itself.  Any  method  of  recording  purchasing 
activities  should  be  self -checking  throughout ;  should 
eliminate  as  much  possibility  of  error  through  trans- 
cription as  may  be  obtained;  and  should  require 
as  little  supervision  as  is  consistent  with  the  im- 
portance of  the  information  recorded. 

Origin  of  the  Following  Forms  and  Discussion 
Thereof. — The  author  is  indebted  to  the  committee 
appointed  by  the  New  England  Purchasing  Agents 
Association  for  all  of  the  following  forms  and  much 
of  the  discussion  thereof  (with  the  exception  of 
the  Purchase  Order  Form).  This  committee  was 
appointed  to  look  into  the  matter  of  recommenda- 
tions and  along  the  lines  of  standardizing  purchase 
records  and  forms.  In  considering  the  subject  the 
committee  kept  in  mind  the  fact  that  the  subject  is 
one  of  vast  detail  and  of  many  aspects.  A  system 
of  purchasing  adaptable  to  one  style  of  business 
would  not  in  reality  be  adaptable  to  many  other 
kinds,  and  some  firms  are  obliged  to  use  special  or 
particular  methods  to  meet  the  demands  of  their 
factory  accounting,  managements,  and  systems. 
With  all  this  in  mind  the  committee  went  to  work 
with  the  idea,  not  of  formulating  a  system,  which 
could  be  used  by  all  in  its  entirety,  but  to  present 
by  careful  analysis,  the  salient  features  of  a  pur- 
chasing system,  which  could  be  adopted  in  general 
by  any  company,  and  leave  to  the  company  the  reg- 
ulation of  its  details  and  minor  changes. 


202      THE  SCIENCE  OF  PURCHASING 


The  Purchase  Order  Form  is  the  one  compiled  by 
the  Executive  Council  of  the  National  Association  of 
Purchasing  Agents  after  considering  carefully  the 
suggestions  of  its  members  (made  through  the  com- 
mittees appointed  by  the  local  branches  of  the  or- 
ganization), together  with  purchase  orders  actually 
in  use  throughout  the  country.  An  attempt  has  been 
made  to  keep  within  the  provinces  of  the  Purchasing 


1 

STOCK   CLERKS    COPY 

Pufclta*.    fWqukllion 

y«o»N»      ... 

—                                     JOHN   DOE   ft   CO 

PURCHASE  REQUISITION 

-                                                            m^  f 

To 

Purchasing  Agw* 

OWAwnry 

SEES 

ocrr. 

•MtOM.HO. 

HHH 

1 

Stock  Cltrfc 

FIG.  4. — THE  REQUISITION  BLANK. 

Department.  Matters  that  involve  other  depart- 
ments are  not  touched  upon,  other  than  as  they 
affect  the  Purchasing  Executive. 

The  Requisition. — For  reference  and  certainty,  all 
purchases  should  be  based  upon  written  requisitions. 
Usually  these  originate  in  the  stock  department,  for, 
while  some  companies  allow  the  several  foremen  to 
issue  requisitions  for  their  particular  departments, 


EECOBDS  AND  FORMS  203 

more  concerns  have  a  central  stock  clerk,  who  alone 
is  responsible  for  all  of  the  stock  and  raw  material 
used  in  the  plant.  In  this  case  the  various  depart- 
ment foremen  look  to  him  both  for  stock  and  infor- 
mation, and  he,  in  turn  is  representative  of  them, 
and  stands  between  them  and  the  purchasing  agent 
in  the  daily  affairs.  The  requisition  blank  should 
be  of  standard  size  and  should  give  the  following 
facts : 

1.  Size,  4  by  6,  or  5  by  8,  for  convenience  in  filing. 

2.  Numbered  in  sequence  for  the  convenience  of 
the  stock  clerk  in  following  up  and  for  con- 
venience of  the  purchasing  agent  in  filing. 

3.  Show  quantity  and  quality  desired,  with  suf- 
ficient detail  to  allow  the  purchasing  agent  to 
answer  any  questions  put  to  him  by  the  vender, 
in  case  of  doubt.     (This  latter  applies  more 
particularly  to  tools,  machine  fittings,  hard- 
ware, electric  appliances,  etc.,  which  require 
special  articles  for  special  work.) 

4.  Show  the  nature  of  the  work  intended  to  be 
done  with  the  articles  ordered,  except  in  case 
of  raw  material. 

5.  The  department  for  which  the  goods  are  in- 
tended should  appear  to  enable  the  purchasing 
agent  readily  to  obtain  first-hand  information 
if  necessary. 

6.  Provide  suitable  space  for  typing  in  the  pur- 
chase order  number  for  convenience  in  refer- 
ence. 


204      THE  SCIENCE  OF  PUECHASING 

7.  At  least  two  copies  should  be  made  out ;  more 
if  the  system  involved  in  a  particular  case 
necessitates  it.  If  the  stock  clerk  is  provided 
with  a  copy  of  the  purchase  order  (see  the  pur- 
chase order),  two  copies  of  the  requisition  are 
sufficient;  but  if  the  stock  clerk  does  not  re- 
ceive a  copy  of  the  purchase  order,  which  is 
to  inform  him  of  the  daily  purchases,  then  a 
third  copy  of  the  requisition  is  advisable.  The 
third  copy  of  the  requisition  is  to  go  to  the 
purchasing  agent  with  his  original  copy,  and 
he  is  to  state  on  it  that  goods  have  been  ordered, 
and  return  the  same  to  the  stock  clerk. 

If  a  requisition  blank  is  provided  with  the  above 
information  it  covers  all  points  necessary  to  begin 
a  purchase,  and  is  suitably  provided  with  the  es- 
sential features  to  permit  following-up  by  the  stock 
clerk,  and  reference  by  the  purchasing  agent. 

Purchases  Made  without  Requisition.— Two  other 
features  should  be  considered  at  this  time,  both  oc- 
curring without  a  requisition,  as  follows: 

1.  Voluntary  orders  by  the  purchasing  agent. 

2.  Local  purchases  by  branch  houses  without  re- 
quisition. 

The  first  occurs  frequently,  because  of  the  pur- 
chasing agent's  familiarity  with  market  conditions 
and  circumstances,  and  orders  are  placed  without 
requisitions.  Therefore,  in  such  cases,  in  order  that 
the  stock  clerk  may  know  what  is  ordered  and  avoid 
duplication,  the  purchasing  agent  should  send  him 


RECORDS  AND  FORMS  205 

a  memorandum  stating  that  he  has  ordered  a  cer- 
tain commodity,  and  requesting  a  confirming  re- 
quisition to  be  made  therefor. 

The  second  case  frequently  occurs  on  small  items, 
which  are  left  to  the  officials  of  a  branch  house. 
The  head  purchasing  agent  should  receive  copies  of 
all  such  orders;  and  as  they  are  generally  a  small 
matter,  and  within  a  limited  value  fixed  by  the  com- 
pany, the  question  of  informing  the  stock  clerk,  and 
requesting  a  confirming  requisition  is  optional,  al- 
though, to  complete  the  records,  it  may  be  deemed 
advisable  to  require  it. 

Some  firms  handle  the  matter  of  purchases  by 
branch  houses  through  the  maintenance  of  a  petty 
cash  fund,  provided  for  this  purpose,  in  which  case 
a  block  of  "Emergency"  order  blanks  in  duplicate 
are  furnished  the  branch  house.  These  forms  are 
filled  out  on  the  day  of  purchase  by  the  local  pur- 
chaser, giving  the  article  and  price  paid  from  the 
petty  cash  fund.  The  original  is  forwarded  at  once 
to  the  purchasing  agent  for  filing,  while  the  duplicate 
is  filed  in  the  branch  office.  The  amount  of  this 
fund  is  fixed  by  the  company  and  rarely  exceeds 
one  hundred  dollars. 

Filing  of  Requisition. — The  purchasing  agent, 
after  he  has  written  the  order  and  has  typed 
in  the  order  number  on  the  quotation  (see  quo- 
tation), should  file  his  copy  under  commodities, 
and  on  following-up  can  refer  to  the  requisi- 
tion by  number,  thus  enabling  the  purchasing 
agent  to  have  ready  and  quick  reference  to  it.  On 


206      THE  SCIENCE  OF  PURCHASING 

looking  up  the  order,  the  purchase-order  number 
and  the  whole  transaction  will  be  immediately  con- 
nected. This  involves  two  references  to  the  purchas- 
ing agent's  files,  but  is  presumably  the  least  num- 
ber of  times  necessary,  in  order  to  be  sure  of  ac- 
curacy, for,  by  reference  to  requisition  number,  the 
purchase  number  of  the  article  wanted  is  brought 
to  attention,  and  an  error  cannot  take  place.  Other- 
wise, if  a  short  cut  is  attempted,  it  may  be  that  the 
purchasing  agent  will  take  his  time  and  trouble  to 
follow  up  and  make  a  report  on  another  article  not 
so  much  needed. 

Quotations. — Whenever  and  wherever  time  and 
conditions  permit,  and  it  is  deemed  advisable,  quo- 
tations should  be  obtained  from  several  dealers. 
Many  companies  prefer  doing  this  by  letter,  but 
the  simplest  and  best  method  would  be  by  regular 
printed  quotation  form  blank  with  necessary  de- 
tails of  such  a  transaction,  showing  the  requisition 
number,  and  with  suitable  space  for  specifications. 
The  time  limit  for  an  answer  should  be  printed 
thereon,  and,  by  having  a  printed  form  typed  in, 
as  necessary,  dealers  immediately  sense  the  fact  that 
other  firms  are  receiving  this  quotation,  and  it  has 
a  tendency  to  bring  results  in  the  form  of  the  low- 
est possible  price.  Oft-times,  if  the  letter  method  is 
employed,  some  dealers  apparently  do  not  realize 
that  it  is  a  request  for  a  bid,  or  that  other  com- 
panies are  receiving  the  same  thing.  A  great  many 
important  purchases  must  be  made  without  a  quo- 
tation, because  of  emergency  conditions,  which  do 


EECOEDS  AND  FORMS  207 

not  permit  of  taking  the  time  necessary,  but  when 
it  can  be  employed,  it  should  be,  both  to  secure  the 
lowest  price,  and  at  the  same  time  to  gain  valuable 
information  regarding  market  conditions. 

It  is  the  practice  of  many  firms  to  furnish  quota- 
tion blanks  to  the  bidder  in  pairs,  the  purpose  of 
the  duplicate  copy  being  for  the  bidder's  conveni- 
ence in  reference  in  case  of  the  purchaser's  accept- 
ance of  the  bid.  "Vender's  File  Copy,"  or  some 


FwmN 
DATE. 

•orrorT 

T» 


JOHN  DOE  A,  CO.  DATE QOOTAT 

900  WEST  ST.  BOSTON.  MASS. 
ON  MOM  (f  CCtriCO  »T  TW«  QUOTATION  NO.  «C  QUOTE  WWCfc  TERMS  AND  OlSCOUNTS  M  TOUWW 


FIQ.  5. — QUOTATION  BLANK. 

similar  explanatory  phrase,  should  be  printed  at  the 
top  of  the  second  blank.  This  method  insures  the 
meeting  of  minds  in  terms  and  subject  matter,  in 
case  a  contract  is  formed  between  the  purchasing 
agent  and  the  vender,  and  saves  time  and  trouble 
in  all  correspondence  which  may  follow  the  request 
for  bids. 


208      THE  SCIENCE  OF  PURCHASING 


The  Purchase  Order.  —  In  making  out  purchase 
orders,  purchasing  agents  and  their  clerks  should 
be  very  careful  to  specify  sufficient  detail  to  make 
a  complete  statement  of  what  is  ordered  as  to  quan- 
tity and  quality,  prices,  discounts,  terms,  routing, 


JHFfc 

\Xf-/ 


PURCHASE  ORDER 

JOHN  DOE  &  CO. 

100  WEST  STREET 


J&    feQ-N* 


Or.  Nat 

SiOasfe 


Tku«  SHIP  tb*  lotloviac  »ecb«a4^ 


SUBJECT  TO  CONDITIONS  Wowi 

Skip  Via 
'MM  ?  O.  E. 


er  rviciAt!<«e  ACUTI 


tMlcct  n«  fapJkrt^  •»<  erir«J  B/L  to 


JOKNDOEACa 


FIG.  6. — PURCHASE  ORDEB  BLANK. 


etc.,  which,  if  followed  carefully,  will  prove  valuable 
in  case  of  disputes  or  litigations.  In  all  such  cases 
the  order  is  the  foundation  of  the  firm's  claim  and 


EECORDS  AND  FOEMS  209 

must  be  depended  upon  to  prove  any  contention  that 
may  arise.  A  contract  is  formed  upon  the  vender's 
acceptance  of  the  purchaser's  offer  to  buy  and,  if 
goods  are  not  up  to  quality,  and  the  order  has  been 
concise,  clear  and  definite,  the  purchasing  agent's 
firm  will  be  protected. 

The  Purchase  Order  (Fig.  6)  is  the  one  compiled 
by  the  Executive  Council  of  the  National  Associa- 
tion of  Purchasing  Agents  and  recommends : 

1.  That  the  size  be  that  of  the  standard  letter — 
7%  by  11  inches.    A  margin  of  %  inch  is 
allowed  at  the  left  side,  for  punching  for  post 
binders;  if  not  desired  for  this  purpose,  the 
printing  can  be  extended  to  include  this  space. 

2.  That  the  words  "purchase  order"  at  the  top 
be  in  %  inch  letters,  the  name  of  the  firm  under- 
neath in  %6  or  %  inch  letters. 

3.  That  the  left  top,  between  "form  number"  and 
space  for  addressing  the  vender,  space  be  left 
for  trade  mark  or  insignia. 

4.  That  the  data  appearing  on  the  purchase  order 
should  be : 

(1)  Order  number  in  sequence,  with  request  on 
vender's  copy  and  the  copy  retained  by  the 
purchasing  agent,  that  the  purchase  order 
number  appear  on  all  packages,  cases  and 
invoices. 

(2)  Date  of  order. 

(3)  Requisition  number,  department,  stores  or 
division  number  and  seller's  number. 

(4)  Name  and  address  of  the  vending  company. 


210      THE  SCIENCE  OF  PURCHASING 

(5)  Shipping  address,  routing  and  date  to  be 
shipped. 

(6)  Address  to  which  invoices  and  original  bill 
of  lading  are  to  be  mailed,  with  request  for 
duplicate  or  triplicate  if  desired. 

(7)  The  order  should  be  typed-in  clearly  and 
definitely  with  price,  discount,  and  terms, 
whenever  possible,  and  whether  f .  o.  b.  des- 
tination or  not. 

Under  "important  conditions"  which  appear  at 
the  bottom  of  the  order  only  such  conditions  as  seem 
to  be  generally  in  order  for  all  firms  concerned  have 
been  suggested.  Certain  companies  necessarily  re- 
quire other  conditions,  which  are  generally  local  in 
character;  a  list  of  some  of  these  particular  condi- 
tions (Fig  7)  is  given  but  their  adoption  is  optional. 

Conditions  should  be  as  brief  as  is  consistent,  but 
should  appear  on  the  face  of  the  order  and  above 
the  signature  of  the  purchasing  agent. 

There  should  be  at  least  four  copies  of  the  pur- 
chase order  as  follows : 

(a)  One  copy  for  the  vender. 

(b)  One  copy  for  the  receiving  clerk. 

(c)  One  copy  for  the  stock  clerk. 

(d)  One  copy  to  be  retained  by  the  Purchas- 
ing Department  for  its  permanent  rec- 
ords. 

For  greater  convenience  in  filing,  the  purchasing 
agent's  copy  of  the  order  should  be  made  of  light 
flexible  cardboard,  which  will  file  better  than  if  made 


RECORDS  AND  FORMS 


211 


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212      THE  SCIENCE  OF  PURCHASING 

out  of  paper.  It  is  also  easier  to  handle,  and  not 
so  liable  to  be  lost  or  blown  aw&y.  Sometimes  a 
fifth  copy  is  made  for  later  reference  to  the  Cost- 
ing or  Accounting  Department,  and  often  a  sixth 
copy  is  sent  with  the  original  to  the  vender  for  his 
acknowledgment.  The  copy  going  to  the  vender 
should  be  printed  at  the  top  "Purchase  Order. " 
The  other  copies  should  have  printed  at  the  top  the 
names  of  those  who  are  to  receive  them,  such  as 
"Stock  Clerk's  Copy,"  "Receiving  Clerk's  Copy," 
etc. 

Acknowledgment.— It  is  advisable  for  all  pur- 
chasing agents  to  make  suitable  arrangements  to 
obtain  an  acknowledgment  on  orders,  particularly 
on  those  which  come  from  other  than  local  terri- 
tory. The  form  of  acknowledgment  is  generally  one 
of  three  methods.  As  stated,  some  companies  send 
an  extra  copy  of  the  purchase  order  to  the  vender, 
suitably  printed  for  an  acknowledgment.  This,  of 
course,  being  a  carbon,  will  have  the  exact  informa- 
tion on  it  of  the  goods  ordered,  and  will  have  a 
space  for  the  vender  to  supply  the  information  as 
to  time  of  shipment.  The  second  method,  and  that 
which  seems  to  be  gaining  favor,  is  to  have 
an  attached,  perforated  slip  at  the  bottom  of 
the  vender's  copy  of  the  order,  which  gives  the  order 
number  and  date,  and  leaves  a  space  for  the  vender 
to  fill,  on  which  he  will  specify  the  date  of  shipment. 
The  third  method  consists  of  a  separate  acknowledg- 
ment form  (Fig.  8)  which  includes  printed  data  of 
requisition  number,  date,  order  number,  name  and 


KECORDS  AND  FORMS  213 

address  of  the  purchasing  company,  space  for  the 
listing  of  the  items  ordered  and  the  date  upon  which 
the  vender  will  make  shipment.  Some  firms  do  not 
require  the  acknowledgment  to  list  the  items,  con- 
sidering the  order  number  and  the  date  of  shipment 
to  be  sufficient  for  record  purposes.  This  form  is 
often  printed  upon  a  postal  card  bearing  the  printed 
address  of  the  purchasing  company  with  the  request 
to  return  the  same. 

After  the  order  is  submitted  and  acknowledgment 
is  received,  or  if  the  information  as  to  time  of  ship- 
ment is  received  in  any  other  way,  the  order  is 
within  the  sphere  of  the  Follow-up  Department, 
which  may  be  conducted  by  the  purchasing  agent 
himself,  or,  as  many  concerns  are  doing,  by  means 
of  a  clerk  who  has  sole  charge  of  this. 

OPTIONAL  CONDITIONS 

Invoices  in  duplicate,  shipping  memoranda  and  bill  of  lading 

with  full  routing  must  be  mailed  to  us  at  on  date 

of  shipment. 

Unless  otherwise  specified,  payment  of  invoices  are  subject 
to  a  cash  discount  on  15th  of  month  following  receipt  of  invoice. 

Material  will  be  received  subject  to  inspection  and,  if  found 
defective,  or  not  in  accordance  with  specifications,  will  be  re- 
turned at  your  expense. 

A  delivery  receipt  showing  order  number  and  description  of 
material  must  accompany  all  city  deliveries. 

By  accepting  this  order  you  agree  to  defend,  protect,  and 

save  harmless its  customers  and  the  users  of  its 

products,  against  all  suits  and  from  all  damage  claims,  and 
demands  for  actual  or  alleged  infringements  of  letters-patent 
by  reason  of  the  use  of  the  articles  hereby  ordered. 

We  reserve  the  right  to  cancel  this  order,  or  any  portion 
thereof,  if  deliveries  are  not  made  as  specified  herein. 

If   this   order   is   subcontracted   the    subcontractor   must   be 


214      THE  SCIENCE  OF  PURCHASING 

instructed    to    mark    all    packages    with    this    order    number. 

We  will  not  accept  substitutes. 

This  company  reserves  the  right  to  cancel  all,  or  part  of, 
this  order  if  not  filled  within  the  specified  time. 

By  paying  your  invoice  before  arrival  and  inspection  of  our 
purchase  we  avail  ourselves  of  the  cash  discount  only,  and  do 
not  thereby  accept  quality  or  quantity  as  approved. 

All  goods  shipped  on  account  of  this  order  will  be  carefully 
inspected,  and,  if  rejected  by  us  on  account  of  material,  work- 
manship or  other  defects,  same  will  be  held  subject  to  your 
orders,  freight  and  cartage  chargeable  to  your  account,  and 
when  returned  are  to  be  replaced  ONLY  on  replacement  purchase 
order. 

The  supplier  herein  guarantees  that  the  sale  or  use  of  its 
product  will  not  infringe  any  United  States  patent  or  process 
of  manufacture  and  covenants  that  it  will,  at  its  own  expense, 
defend  every  suit  or  action  which  shall  be  brought  against 

or  those  selling  or  using  any  product  of  the  supplier, 

for  any  alleged  infringement  or  claim  of  infringement  of  any 
patent  or  process  of  manufacture  by  reason  of  the  sale  or  use 

of  product  and  agrees  that  it  will  pay  all  costs, 

damages  and  expenses  which  might  sustain  thereby. 

ACKNOWLEDGMENT  FORM 


Form  No. ACKNOWLEDGMENT 

OF 
Req.  No ORDER        Date-   19 

To  JOHN  DOE  &  CO., 
900  West  St. , 
Boston,  Mass.  Your  Order  No. 

We  hereby  acknowledge  and  accept  your  numbered  order  for: 


Shipment  will  be  made  __ 19 


FIG.   8 


EECOEDS  AND  FORMS  215 

The  Follow-up  System. — It  is  necessary  in  order 
to  get  satisfactory  service,  and  to  keep  the  purchas- 
ing company  advised  regarding  deliveries,  to  adopt 
a  follow-up  system.  It  naturally  follows  that  this 
system  should  be  applied  more  intensely  to  out-of- 
town  shipments  than  to  local  pick-ups. 

A  great  many  concerns  use  a  signal  system,  which 
is  a  small,  metal,  movable  tab,  placed  on  top  of  the 
purchasing  agent's  copy  of  the  order.  This  top  is 
marked  off  numerically  from  1  to  31  inclusive,  or 
any  other  number.  The  tab  is  placed  over  the  num- 
ber corresponding  to  the  one  on  which  advice  has 
been  received  that  shipment  will  be  made.  In  con- 
nection with  this  point  of  determining  the  date  of 
shipment,  it  is  easy  to  see  that  the  acknowledgment 
of  the  order  occupies  a  place  of  the  utmost  import- 
ance. The  signal  tabs  arrange  themselves  in  a 
straight  line  throughout  the  order  file,  and  all  tabs 
for  given  dates  can  instantly  be  noted  and  the  cards 
removed.  The  first  thing  to  do  is  to  ascertain 
whether  the  invoice  from  the  shipper  has  been  re- 
ceived. If  not,  a  letter  or  blank  form  of  inquiry 
should  be  sent  out  and  the  tab  moved  ahead  the 
requisite  number  of  days  for  the  receipt  of  the  an- 
swer. The  tab  should  then  be  changed  to  conform 
to  the  answer.  A  great  advantage  of  having  a  light, 
flexible  cardboard  for  the  purchasing  agent's  copy 
of  the  order  as  aforesaid,  will  here  be  noted,  for  the 
objection  has  been  made  that,  where  the  purchasing 
agent's  copy  is  of  paper,  tabs  are  easily  misplaced 
and  get  moved  to  other  dates,  which  will  involve  in- 


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JRCHASING  AGENTS  COPY 

SHIPPING  OR 

BOSTON,  MASS. 

;OUNT  OP  OUR  PURCHASE  ORDER 
rHEM.  SHOW  RETURN  OF  PATTER 

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RECORDS  AND  FORMS  217 

accuracy.  The  tab  method  saves  all  extra  expense 
of  having  an  extra  copy  of  the  purchase  order  and 
an  extra  file. 

Many  firms,  however,  prefer  to  use  an  extra  copy 
of  the  purchase  order,  with  the  proper  notations 
made  thereon  by  the  purchasing  agent  or  clerk  in 
charge  as  to  the  probable  date  of  shipment.  This 
copy  is  filed  by  date  of  expected  shipment  and  on 
each  day  letters  or  blank  inquiry  forms  are  sent  to 
those  venders  from  whom  no  invoices  have  been  re- 
ceived as  expected.  (For  further  use  of  this  copy 
of  the  purchase  order  see  "  Relation  of  Purchasing 
Department  to  the  Accounting  Department. ") 
Either  system  will  bring  results  if  properly  looked 
after,  and  especial  care  should  be  taken  of  the  fol- 
low-up records  whatever  the  method  used.  A  great 
deal  of  money  and  time  can  be  lost  by  a  company 
whose  shipments  are  not  received  promptly. 

The  Record  Cards.— A  record  card  of  some  form 
is  necessary  to  every  purchasing  department.  In 
considering  this  card  it  is  necessary  to  decide  what 
information,  and  how  much,  the  purchasing  agent 
needs  for  ready  reference  in  the  future  concerning 
the  article  purchased,  the  quantity,  the  price,  and 
from  whom  it  was  purchased.  These  cards  should 
be  indexed  under  the  names  of  commodities.  For 
example,  cards  headed  at  the  top  Gasoline,  Flour, 
Portland  Cement,  Coal,  and  other  words  of  a  general 
nature,  require  no  explanation.  Neither  do  cards 
headed  Nails,  8-penny,  Coated;  Lumber,  Hard  Pine 
6X8;  and  a  card  for  each  does  not  involve  too 


218      THE  SCIENCE  OF  PUECHASING 


many  complications.  However,  where  cards  in- 
volve articles  which  have  a  variety  of  forms  or 
shapes,  and  each  form  or  shape  has  a  great  many 
sizes,  it  is  best  not  to  have  a  card  for  each  size,  but 
a  card  for  each  shape.  For  example,  Eods,  Brass, 
Bound,  %  inch  diameter,  %  inch  diameter,  1  inch 
diameter,  could  all  be  upon  one  card,  designated 
Eods,  Brass,  Eound.  Likewise,  there  should  be  a 
card  for  Eods,  Brass,  Square;  Eods,  Brass,  Hexa- 


PURCHASE  RECORD  CARD 


FIG.  10.— PURCHASE  BECOBD  CAED. 

gon,  etc.,  and  the  same  rule  applies  to  practically  all 
machine  fittings  and  appliances.  In  other  words, 
general  classifications  should  be  formed,  having  a 
card  for  each,  and  on  this  card  various  sizes  or 
kinds  can  be  shown  of  one  classification  only. 

Experience  has  shown  that  the  following  items  are 
necessary  upon  the  record  card  (Fig.  10) : 

1.  Order  number  and  date. 

2.  Name  of  vender. 


KECOKDS  AND  FORMS  219 

3.  Unit  price. 

4.  Date  of  shipment. 

5.  Quantity,  price  and  discount,  or  net  price  per 
unit. 

6.  Column  for  checking  price  if  0.  K. 

7.  Date  of  delivery. 

Regarding  the  quantity,  it  is  deemed  advisable 
by  some  to  have  two  columns ;  one  in  which  to  enter 
the  number  of  pounds,  gallons,  feet,  etc.,  and  the 
other  to  be  used  where  there  is  a  carload  shipment 
of  a  commodity,  and  to  show  the  number  of  units 
contained  in  the  car,  such  as  the  number  of  casks, 
barrels,  bales,  boxes,  etc.  This  latter  is  not  of  pri- 
mary importance,  except  where  this  information  may 
prove  helpful  to  the  traffic  department,  in  cases  of 
claims  or  of  faulty  deliveries,  and  in  later  questions 
relative  thereto.  If  either  column  must  be  elimi- 
nated, the  large  column  showing  pounds,  gallons,  etc., 
should  be  kept. 

As  to  the  cost  column,  whether  or  not  the  record 
cards  show  the  price  and  the  discount  or  the  net 
price  with  the  discount  figured  off,  is  a  matter  to 
be  decided  by  the  purchasing  agent.  Particular  at- 
tention is  called  to  the  relation  in  which  the  sample 
diagram  is  arranged,  namely,  having  the  commodity 
at  the  top,  and  the  different  orders  and  deliveries 
in  the  same  straight  line  underneath.  Thus  at  a 
glance  can  be  shown  how  much  of  a  given  article 
has  been  used  since  the  first  of  the  year,  and  even 
the  year  previous,  or  for  any  six  months.  There  are 
no  other  details  appearing  on  this  card,  and  no  de- 


220      THE  SCIENCE  OF  PURCHASING 

liveries  are  entered  until  order  is  completed;  then 
one  entry  finishes  the  item. 

The  partial  delivery  notations  appear  on  the  back 
of  the  purchasing  agent 's  copy  of  the  purchase  order 
(Fig.  10)  which  he  keeps  in  his  file  in  the  nature  of 
a  continuous  record.  Each  delivery  is  subtracted 
from  the  last  balance  due,  and  a  new  balance  shown 
in  the  right-hand  column  until  the  order  is  com- 
pleted ;  then  the  copy  of  the  order  is  taken  from  the 
live  index,  notation  of  the  total  is  made  upon  the 
record  card,  and  the  purchase  order  is  filed  in  the 
dead  index.  By  these  means,  the  purchasing  agent 
can  find  information  on  any  order  from  either  of 
two  sources.  Incomplete  shipments  are  found  on 
his  purchase  cards,  and  complete  shipments  on  his 
record  cards.  This  method  will  be  found  to  save 
a  great  deal  of  extra  work,  for  it  is  essential  that 
the  partial  deliveries  should  appear  upon  the  pur- 
chase order,  and  it  is  unnecessary  duplication  of 
work  to  put  the  same  items  down  upon  both  the 
order  card  and  the  record  card. 

Filing  the  Record  Card. — The  record  card  in  gen- 
eral use  to-day  is  of  standard  size,  5  by  8  inches. 
However,  there  is  a  possibility  that  a  special  card 
8  by  10,  because  of  its  greater  utility,  may  supplant 
the  5  by  8  size  with  the  majority  of  purchasing 
agents,  for  experience  has  shown  that  a  card  8  inches 
wide  and  divided  in  the  center  does  not  provide  suf- 
ficient space  for  all  the  columns  necessary  for  two 
complete  records  on  the  face  of  each  card.  A  10- 
inch  card  makes  up  this  lack  and,  in  installing  a 


RECORDS  AND  FORMS  221 

new  filing  equipment,  it  is  advisable  to  consider 
adopting  the  8  by  10  size. 

The  record  card  should  be  filed  by  commodities, 
in  a  file  classified  by  departments  or  branch  houses, 
or  by  expenses,  such  as  Raw  Material,  Packing 
Material,  General  Expense,  Power  and  Heat,  Ship- 
ping Expense,  etc.  The  cost  accountant  should  be 
called  into  consultation  on  this  point. 

Some  purchasing  agent's  forms,  as  the  circum- 
stances of  their  organization  may  require,  show  a 
distribution  column  on  their  card;  that  is,  they 
show  the  department  or  branch  to  which  the  par- 
ticular goods  go.  Possibly  department  stores,  muni- 
cipalities, and  other  businesses  of  similar  nature 
would  do  well  to  incorporate  this  feature  in  their 
records,  but  most  business  concerns  do  not  require 
this  column. 

Receiving  Record. — The  functions  of  the  receiv- 
ing department  are  closely  allied  to  the  purchasing 
department,  and  the  two  should  work  in  conjunc- 
tion. Many  concerns  do  not  consider  this  depart- 
ment in  its  true  status,  but  whenever  possible  the 
purchasing  agent  should  insist  upon  having  a  bright 
and  abjle  man  as  receiving  clerk,  and  should  have 
the  right  to  use  such  methods  or  practices  in  co- 
ordination between  himself  and  this  clerk  as  is 
necessary  to  handle  the  delivery  of  goods  accur- 
ately and  completely. 

As  has  been  stated,  the  receiving  clerk  is  pro- 
vided with  a  copy  of  the  purchase  order  for  his 
guidance  in  determining  the  name  of  the  shipper  and 


222      THE  SCIENCE  OF  PURCHASING 

the  quantity  of  goods  expected  to  be  received.  It 
has  also  been  stated,  in  a  previous  chapter,  that 
some  firms  omit  from  this  copy  of  the  purchase 
order  the  quantity  of  goods  purchased.  The  ex- 
planation of  this  omission  is  that  the  receiver  will 
make  a  more  accurate  count,  and  will  not  be  tempted 
to  copy  the  quantity  purchased  without  honestly 
counting  the  same.  The  majority  of  firms,  how- 
ever, place  sufficient  confidence  in  their  receiver  to 


FIG.  11. — RECEIVING  RECORD. 

trust  him  not  to  neglect  a  proper  checking  of  de- 
liveries, and  they  feel  that,  by  showing  the  quantity 
ordered,  he  will  be  more  apt  to  detect  shortages, 
than  otherwise. 

This  copy  of  the  purchase  order  is  given  to  the 
receiver  as  a  guide,  and  it  is  not  customary  for  him 
to  make  his  return  thereon.  For  this  purpose, 
blanks  (Fig.  11),  printed  "  Receiving  Record, "  are 


EECOEDS  AND  FOEMS  223 

provided  in  triplicate.  It  shows  the  name  of  the 
shipper,  the  name  of  the  transportation  company, 
pro  number,  order  number,  and  freight  charges  at 
the  top,  and  the  quantity  and  name  of  goods  below. 
Slips  are,  of  course,  entered  by  the  receiving  clerk. 
The  original  and  duplicate  are  forwarded  to  the 
stock  clerk  or  to  the  department  heads,  according 
to  the  method  employed  in  the  different  companies. 
The  original  is  signed  by  the  person  who  receives 
it  and  passed  on  to  the  purchasing  department. 
The  duplicate  is  either  retained  by  the  stock  clerk  or 
department  head,  and  the  perpetual  inventory  is 
posted  from  it — if  he  keeps  it — and,  if  not,  the 
duplicate  is  sent  to  the  department  which  does  keep 
the  perpetual  inventory. 

The  same  procedure  is  adopted  throughout  when 
an  order  is  filled  by  partial  deliveries,  a  new  receiv- 
ing slip  or  record  being  made  out  for  each  delivery. 

Checking  Invoices. — The  purchasing  agent  should 
check  all  invoices  for  the  material  which  he  has  or- 
dered, as  he  is  in  a  position  to  know  the  quality  and 
quantity  wanted,  and  is  familiar  with  samples,  the 
needs  of  his  factory,  etc.  To  allow  any  other  depart- 
ment to  check  invoices  is  not  for  the  best  interests 
of  the  company,  although  some  companies  employ  it 
as  a  safeguard.  Having  received  the  original  and 
the  receiving  record  (or  records  of  partial  ship- 
ment), the  purchasing  agent  compares  them  with  the 
invoice,  makes  notations  of  any  shortage,  attaches 
the  receiving  slips  to  the  back  of  the  invoice  and 
passes  it  to  the  clerk  who  enters  the  record  cards. 


224      THE  SCIENCE  OF  PURCHASING 

No  invoice  should  be  held  for  entry  for  longer  than 
twenty-four  hours,  because  of  the  possibility  of  los- 
ing the  discount  by  delayed  payment. 

The  clerk,  after  making  the  proper  entries  on  the 
record  card,  passes  the  invoice  to  the  Accounting  De- 
partment. In  regard  to  the  permanent  disposal  of 
the  receiving  clerk's  copy  of  the  purchase  order, 
some  companies  provide  a  rubber  stamp,  marked 
"  RECEIVED, "  with  date  and  quantity.  This  is 
stamped  upon  the  face  of  the  receiver's  copy  of  the 
order  each  time  a  delivery  is  made  upon  a  part  of 
that  order,  and,  when  all  deliveries  are  received,  the 
copy  is  sent  to  the  purchasing  department  and  filed 
permanently  in  numerical  order. 

A  very  good  system  adopted  by  some  firms  is  as 
follows : 

On  the  back  of  the  purchasing  agent's  office  copy 
of  the  order  there  is  kept  (Fig.  12),  on  one-half  of  the 
sheet,  a  record  of  all  receipts  pertaining  to  that  or- 
der, and  other  data  necessary,  and,  on  the  other  half, 
a  record  of  invoices  as  to  date,  quantity,  price,  dis- 
counts, and,  when  possible,  the  invoice  number. 
When  the  shipment  is  completed  and  invoices  are 
paid  the  purchasing  agent's  copy  will  bear  a  com- 
plete record  of  the  transaction;  on  one  side,  the  or- 
der itself,  and  on  the  reverse  side  full  information 
concerning  the  receipts,  etc.  Such  a  record  is  valu- 
able for  reference  purposes  and  requires  no  more 
time  or  labor  than  the  various  other  methods. 

Shortage.— Any  shortages  or  overcharges  noted 
are  referred  to  the  Traffic  or  Claim  Department.  In 


KECOEDS  AND  FORMS 


225 


some  cases  such  notations  are  referred  to  the  pur- 
chasing agent  himself,  who  makes  claim  upon  the 
shipper  or  transportation  company  according  to  the 
liability,  for  any  damage,  loss  or  shortage.  If  re- 
ferred to  the  Traffic  or  Claim  Department,  the  pur- 
chasing agent  should  employ  a  blank  form  made  out 
in  duplicate,  one  copy  going  to  the  Traffic  or  Claim 
Department  and  the  other  to  the  Accounts  Payable 
Department  attached  to  the  invoice  before  it  is  ap- 


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FlG.     12. — FORM    APPEARING    ON    REVERSE    SIDE    OF    PURCHASE 
ORDER    (FlG.   6.). 

proved  by  the  Purchasing  Department.  When  the 
claim  is  adjusted  and  credit  or  check  received,  the 
fact  should  be  noted  on  the  blank  and  forwarded  to 
the  Accounts  Payable  Department.  These  slips 
should  be  numbered  for  the  convenience  of  the  Ac- 
counting Department.  In  case  the  purchasing 
agent  makes  such  a  claim  himself,  he  retains  the 
copy  of  the  blank  that  would  have  gone  to  the  Traf- 


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226 


RECORDS  AND  FORMS  227 

fie  or  Claim  Department,  makes  the  proper  notations 
upon  it,  and  sends  it  to  the  Accounting  Department. 

Goods  Returned  for  Credit.— The  purchasing 
agent  should  devise  some  simple  method  of  handling 
matters  pertaining  to  goods  returned  for  credit. 
There  is  a  possibility  of  the  firm  losing  money 
through  records  of  returns  not  getting  on  the  books 
and  the  vender  failing  to  send  a  credit  memoran- 
dum. All  such  instances  of  defective  shipments  or 
goods  different  from  those  ordered  will  naturally 
come  to  the  notice  of  the  purchasing  agent,  and  he 
should  be  the  one  to  make  out  the  necessary  papers 
for  their  return  and  see  that  these  papers  reach  the 
proper  departments. 

A  5  by  8  standard  form,  as  per  Figure  13,  is  sug- 
gested. It  consists  of  an  original  and  three  copies. 
The  original  is  mailed  to  the  vender  to  whom  the 
goods  are  being  returned.  One  copy  is  kept  by  the 
purchasing  agent ;  one  is  sent  to  the  shipping  room ; 
and  one  is  forwarded  to  the  accounting  or  cost  de- 
partment for  proper  entry  upon  the  books.  After 
shipment  is  made,  and  the  shipper's  copy  filled  in, 
it  will  be  returned  to  the  purchasing  agent  and  affixed 
to  his  copy.  Both  copies  are  then  forwarded  to  the 
Accounting  Department  to  show  that  the  matter  has 
been  taken  care  of.  The  first  copy  that  the  Account- 
ing Department  receives  is  in  the  nature  of  a  warn- 
ing and  serves  to  put  it  on  its  guard.  The  copy  that 
the  purchasing  agent  temporarily  retains  will  serve 
for  him  to  make  the  proper  entry  upon  his  record 
cards,  provided  the  delivery  of  these  goods  has  been 


228      THE  SCIENCE  OF  PURCHASING 

entered  on  the  record.  If  the  delivery  has  not  been 
entered  there  is  no  need  to  show  that  they  were  re- 
turned. For  accuracy,  however,  it  is  better  to  en- 
ter the  goods  on  the  records  and  note  that  they  were 
returned.  This  record  will  be  available  at  all  fu- 
ture times  for  information,  and  will  show  just  when 
and  what  disposition  was  made  of  the  article  in  ques- 
tion. The  bookkeeping  department  would  necessar- 
ily show  an  item  on  this  same  point,  but  in  all  prob- 
ability would  give  no  information  as  to  what  the 
credit  was  for.  The  record,  when  it  shows  every 
detail  of  every  transaction,  will  serve  the  purchas- 
ing agent  in  the  nature  of  a  guide  to  a  dependable 
source  of  supply.  Frequent  returns  to  the  same 
vender  is  an  indication  that  the  firm  is  careless  and 
unreliable  in  many  instances. 

Delivery  of  Patterns  to  a  Foundry. — Many  pur- 
chasing agents  pay  for  and  furnish  their  own  pat- 
terns of  specially  designed  equipment  and  supplies, 
and  it  is  considered  advisable  to  cover  this  point. 

All  patterns  should  be  numbered  and  a  card  record 
thereof  filed  in  a  cross-index  by  numbers  and  names 
in  one,  and  names  and  numbers  in  the  other.  When 
goods  are  sent  to  the  foundry  a  form  similar  to 
Figure  10  will  prove  of  some  help.  These  forms  are 
5  by  8  standard  size,  and  should  be  printed  "  Pat- 
tern, "  or  some  other  suitable  heading,  for  this  pur- 
pose alone.  There  should  be  four  copies.  One  is 
to  go  to  the  foundry  with  instructions  printed  to  re- 
turn the  pattern — make  memo,  on  the  invoice  of  its 
return,  and  show  the  pattern  number  thereon.  The 


RECORDS  AND  FORMS  229 

second  copy  is  held  by  the  purchasing  agent  until 
the  return  of  the  pattern.  The  third  copy  goes  to 
the  shipping  clerk  and,  after  shipment  is  made  and 
noted  on  this  copy,  it  is  returned  to  the  purchasing 
agent.  The  fourth  copy  is  held  by  the  receiving 
clerk  and  forwarded  to  the  purchasing  agent  upon 
the  return  of  the  pattern.  The  completed  trans- 
action is  filed  together  and  removed  from  the 
live  index  and  filed  in  the  dead  index  where  it  re- 
mains. 

Relation  of  Cost  Department  to  Purchasing  De- 
partment.— The  committee  found,  during  its  investi- 
gation, a  great  deal  of  variance  among  different 
firms  in  the  matter  of  transmitting  the  cost  of  vari- 
ous articles  from  the  purchasing  agent  to  the  cost  ac- 
countant. Two  methods  which  seemed  particularly 
simple  and  direct  were  selected  by  this  committee: 
1.  The  first  involves. the  employment  of  a  central 
stock  clerk  who  has  charge  of  a  perpetual  inventory, 
which  he  keeps  accurately.  An  extra  copy  of  the 
purchase  order  should  be  retained  by  the  purchas- 
ing agent  in  addition  to  his  regular  copy,  and  when 
the  goods  arrive  he  can  obtain  from  the  invoice  the 
price,  and  from  the  receiving  record  the  quantity, 
listing  both  upon  the  extra  copy  of  the  purchasing 
order,  carrying  out  the  total  if  he  prefers.  This 
is  forwarded  to  the  central  stock  clerk,  who  com- 
putes the  price  of  this  lot  and  averages  the  price 
on  both  old  and  new  stock,  carrying  out  the  newly 
found  average  price  in  a  column  for  that  purpose. 
All  goods  taken  from  stock  after  the  arrival  of 


230      THE  SCIENCE  OP  PURCHASING 

new  goods  are  charged  at  the  new  average  price. 
For  example,  if  a  firm  had  on  hand  100  items  at 
90  cents  and  purchased  900  more  at  $1,  it  would 
have  a  total  of  1,000  costing  $990,  or  an  average 
price  of  99  cents  each. 

This  method  of  obtaining  the  average  cost  has 
been  used  successfully  with  but  few  discrepancies 
of  total  value  of  stock  in  the  stock  rooms  as  com- 
pared with  the  bookkeeping  figures.  These  dis- 
crepancies should  be  redistributed  in  the  usual  way. 

In  carrying  out  this  plan,  instead  of  the  stock 
clerk  obtaining  both  prices  and  quantity  from  the 
purchasing  agent,  he  obtains  the  quantity  from  the 
receiving  record,  a  copy  of  which  is  furnished  him, 
and  his  prices  from  the  purchasing  agent. 

2.  In  the  second  method  the  stock  clerk  does  not 
have  anything  to  do  with  prices  (which  are  con- 
trolled by  a  cost  clerk),  but  enters  the  quantity. 
The  quantity  is  already  on  the  copy  of  the  purchase 
order  forwarded  to  the  cost  department  and  the 
purchasing  agent  furnishes  the  cost  clerk  with  full 
information  as  to  net  price.  The  cost  clerk  figures 
only  the  unit  cost  of  the  last  shipment  received  and 
does  not  average  his  price  or  consider  the  price 
of  any  stock  on  hand.  This  method  works  in  favor 
of  a  firm  on  a  rising  market.  On  a  declining  mar- 
ket a  slight  loss  will  ensue  until  the  minimum  is 
used  up  and  all  goods  will  figure  on  a  basis  of  the 
last  cost,  until  a  new  set  of  figures  for  new  ship- 
ment is  obtained.  When  goods  are  used  with  fair 


RECORDS  AND  FORMS  231 

regularity,  this  method  has  certain  advantages,  but 
if  shipments  are  received  only  two  or  three  times 
a  year,  it  would  be  well,  in  using  this  method,  to 
write  once  a  month  (or  at  other  regular  periods), 
and  obtain  the  latest  price  from  the  vender. 


APPENDIX 
NOTES  ON  THE  TESTING  OF  MATERIALS 

BY  HENRY  C.  KAYSER,  PH.D. 
Industrial  Testing  Laboratory,  Los  Angeles. 

To  the  purchasing  agent  the  subject  of  testing  materials 
is  of  such  fundamental  importance  as  to  justify  a  brief 
discussion  of  the  theory  upon  which  it  is  based  and  to  out- 
line its  purpose  and  ultimate  aim. 

To  determine  the  value  of  any  material  for  a  given  pur- 
pose its  properties  must  be  measurable.  These  properties 
may  have  limiting  values  which  must  be  regarded  or  the 
material  may  prove  worthless,  costly,  or  even  harmful  for 
the  purpose  intended.  The  testing  of  materials  may  prove 
a  needless  waste  of  time  and  money,  unless  due  considera- 
tion has  been  given  to  the  nature  of  the  test  to  be  applied, 
the  conditions  under  which  they  are  to  be  made,  and  the 
interpretation  of  results.  It  includes  measurements  of  both 
quantity  and  quality. 

The  testing  of  materials  serves  two  important  and  dis- 
tinct purposes;  first,  to  ascertain  whether  or  not  they 
comply  with  specifications,  and  second,  to  add  to  the  gen- 
eral fund  of  knowledge  regarding  them. 

Materials  may  be  classified  in  many  different  ways,  for 
example;  chemically,  physically,  according  to  their  tech- 
nical applications,  and  likewise  by  any  other  aspect  se- 
lected as  criterion.  Classification  according  to  the  use 
of  the  materials  is  especially  significant,  since  the  testing 
of  materials  is  primarily  done  with  a  view  to  their  efficient 

233 


234  APPENDIX 

use.  Materials  are  grouped  according  to  their  use,  for  ex- 
ample: electrical  materials,  lubricants,  illuminants,  color- 
ants, abrasives,  and  many  others.  The  materials  possess 
properties  useful  for  a  specialized  purpose.  An  import- 
ant group,  based  upon  use  is  "structural  materials, "  such 
as  metals,  stone,  cement,  sand,  brick,  terra  cotta,  wood, 
protective  coatings,  paints,  etc.  Structural  materials  have 
for  their  practical  function  to  maintain  predetermined 
space  relations  of  the  parts  of  the  structure  under  service 
conditions,  and  to  protect  the  structure  from  the  action 
of  unfavorable  agencies. 

Another  group  includes  materials  in  which  pliability 
or  flexibility  is  a  desirable  quality.  This  class  includes 
textiles,  paper,  rubber,  leather,  and  similar  materials. 

Another  group  consists  of  materials  which  form  the  sur- 
face upon  other  materials  by  adhesion  or  absorption.  This 
group  includes  protective  coatings,  such  as  metallic  coatings 
and  paints,  inks,  stains  and  dyes,  oils  and  varnishes. 

The  utility  of  materials  depends  upon  the  nature,  magni- 
tude and  stability  of  their  properties. 

The  economic  value  of  any  given  property  depends  upon 
its  relative  effect  upon  the  net  efficiency  of  the  material 
for  a  given  purpose.  Quality  is  that  which  fits  a  material 
for  a  given  use.  The  material  is  not  simply  good,  it  is 
good  for  a  certain  purpose,  and  the  word  "  quality "  is 
meaningless  apart  from  the  use  in  view.  Good  quality 
means  good  for  a  definite  use.  The  test  of  the  material 
is  to  determine  how  good  for  that  use.  Too  much  stress 
cannot  be  laid  upon  the  economic  value  of  testing  for 
quality  of  materials  before  their  use. 

The  time  has  passed  when  the  strength  of  materials  can 
be  left  to  guesswork  or  to  intelligent  opinion  alone.  Materi- 


APPENDIX  235 

als  must  be  guaranteed  by  specification  and  test.  While 
the  testing  of  materials  in  the  modern  sense  is  now  a  most 
important  factor  in  the  industries,  such  testing  is  still 
in  its  initial  stage  with  respect  to  the  establishment  of 
rigorous  standards  of  quality.  A  specification  is  in  a 
sense  a  working  standard  of  quality  and  indicates  the 
quality  desired  and  the  conditions  needed  to  insure  it. 
A  specification  is  too  often  not  the  real  standard  of  quality 
at  all.  It  may  be  narrow  and  exclude  efficient  material 
or  so  loose  as  to  admit  material  of  poor  quality.  A  speci- 
fication, too,  may  require  tests  which  do  not  gauge  any 
desirable  property  and  yet  omit  tests  of  vital  importance. 
Defect  may  be  due  to  lack  of  knowledge  or,  too  often,  to 
an  effort  merely  to  duplicate  material  once  found  satis- 
factory. This  is  done  by  describing  a  special  brand  and 
adding  the  words  "or  equal,"  or  by  minutely  describing 
the  properties  of  the  acceptable  brand.  Both  methods  are 
used  in  place  of  specifying  the  use  required  of  the  material 
— a  practical  recourse  where  a  definite  standard  is  still 
impracticable.  Defective  specifications,  whether  due  to 
compromise  of  quality  for  economy  or  through  lack  of  data 
should  be  replaced  by  those  in  which  the  best  magnitude  of 
each  property  involved  is  so  specified  as  to  predetermine  the 
definite  quality  best  meeting  the  need.  The  quality  speci- 
cation  should  be  just  as  definite  to  suit  the  conditions  of 
use  which  it  must  meet.  Bach  essential  requirement, 
whether  of  size  or  quality,  must  be  correct  within  certain 
limits  or  the  article  is  unsatisfactory  or  useless  for  the 
purpose.  An  ideal  specification  for  material  regards  both 
economy  and  efficiency  and  does  not  ignore  depreciation, 
replacement,  repair,  and  service. 

The  basis  of  specifications  should  be  made  the  subject  of 


236  APPENDIX 

constant  study  by  the  purchasing  agent,  and  changes  should 
be  made  as  soon  as  new  technical  knowledge  necessitates. 

Inflexible  specifications  retard  technical  progress,  but  if 
allowed  to  advance  apace  with  new  technical  knowledge, 
the  specification  becomes  a  distinct  aid  to  such  progress. 

The  purchasing  agent  should  select  such  tests  which 
suffice  to  show  with  commercial  accuracy  the  fitness  of  the 
material  for  the  purpose  in  view.  Economy  dictates  this 
limitation  since  in  many  cases  the  time  and  labor  needed 
for  more  elaborate  tests  would  make  them  prohibitive,  and 
nullify  the  economic  value  of  such  testing.  As  far  as  prac- 
tical the  testing  laboratory  selected  to  perform  the  tests 
should  be  given  all  the  facts  with  respect  to  the  material 
sent  for  test  and  the  use  for  which  it  is  intended.  Other- 
wise a  test  cannot  be  well  planned  and  the  user  may  be  un- 
able to  correctly  interpret  the  report  of  the  test.  An  in- 
correct method  of  selecting  test  samples  may  entirely  viti- 
ate a  test  as  a  measure  of  the  quality  of  a  given  material. 
The  best  manufacturers  aim  to  keep  their  product  within 
an  acceptable  range  of  quality.  A  single  test  piece  sel- 
dom shows  the  average  quality  of  the  material  as  a  whole. 
If  the  test  is  designed  to  determine  the  average  quality, 
sample  test  pieces  should  be  taken  from  the  various  parts 
of  the  product. 

Again,  the  properties  of  the  material  sometimes  change 
on  exposure  to  light,  air,  moisture,  or  other  agencies.  If 
the  samples  are  not  properly  protected,  they  may  cease  to 
be  typical.  In  some  cases,  sampling  of  material  is  done 
directly  by  the  testing  laboratory,  in  other  cases,  samples 
are  submitted  directly  by  the  purchasing  agent.  Samples 
which  are  liable  to  change  upon  exposure  should  be  pro- 
tected in  such  a  manner  as  to  insure  constancy  until  the  test 


APPENDIX  237 

is  made.    All  samples  should  be  protected  from  all  sources 
of  contamination.    If  the  test  is  to  check  compliance  with 
specifications,  a  copy  of  the  specifications  should  accompany 
the  request.    It  is  particularly  important  that  details  be 
given  as  to  the  source,  brand,  and  use  of  the  material 
— data  which  modify  the  test  selected  to  ascertain  the  fit- 
ness of  the  material  for  a  specified  use. 
Classes  of  Materials 
1.  Metals 

A.  Metals  and  Metal  Products 

(1)  Definition: 

Metals  and  metal  products  include  the  ele- 
mentary metals ;  first,  ferrous  alloys,  including 
all  kinds  of  steel ;  nonf  errous  alloys,  including 
bronzes,  brasses,  compositions,  special  alloys, 
etc.;  together  with  manufactured  material  or 
devices  made  from  these,  such  as  plated  metals, 
enameled  ware,  chains,  cables,  springs,  steel 
rails,  etc. 

(2)  Purpose  of  Tests 

(a)  Determinations  of  the  quality  or  prop- 

erties. 

(b)  Acceptance    or    rejection    of    materials 

bought  under  contract,  which  are  to 
fulfill  certain  specifications. 

(c)  To   ascertain   the   causes   of  failure   in 

metal  products  or  structures. 

(3)  Nature  of  Tests 

(a)  Chemical  analysis, 

(b)  Metallographic    examination    and    heat 

treatment. 

(c)  Mechanical  tests. 

(d)  Miscellaneous  tests  of  physical  properties. 


238  APPENDIX 

(4)  Sampling 

Correct  sampling  is  of  utmost  importance; 
the  purchasing  agent  should  abide  by  the  in- 
structions ordinarily  furnished  by  the  testing 
laboratory  selected  to  perform  the  tests; 
drillings  sent  for  chemical  analysis  should  be 
free  from  oil,  slag,  moisture,  dirt,  or  other 
contaminations. 
B.  Composite  Metal  Products 

(1)  Definition: 

Composite  metal  products  form  a  class 
of  metal  products  which  is  composed  of  two 
or  more  materials,  for  example,  plated,  en- 
ameled, and  case-hardened  metals.  Plated  or 
coated  metals  include  roofing  terneplate, 
"bright  tin,"  galvanized  iron,  etc.  They  all 
consist  of  an  alloy  or  a  single  metal  applied 
to  a  steel  or  iron  base  called  " black  plate." 
The  coating  or  terneplate  consists  of  an  alloy 
of  lead  and  tin:  That  on  bright  tin  plate  is 
pure  tin,  and  that  on  galvanized  metal  is  zinc 
applied  to  the  black  plate.  Terneplate  and 
galvanized  iron  are  used  in  general  building 
construction,  while  bright  tin  is  used  in  the 
canning  industry  and  for  cooking  and  domestic 
utensils.  The  coating  should  be  adherent  and 
continuous,  free  from  pinholes  and  imperfec- 
tions and  the  base  and  coating  should  stand 
the  required  bending  and  distortion  neces- 
sary to  make  proper  joints  and  seams  with- 
out fracture,  or  separation  of  coating  from 
base.  Enameled  iron  and  enameled  steel  are 
produced  by  thoroughly  cleaning  the  sur- 


APPENDIX  239 

face  and  applying  a  coating  of  thin  paste, 
(slush  or  ground  coat),  which  consists  of  a 
fairly  basic  mixture  of  borosilicates.  After 
heating  and  fusion  of  this  layer  a  second,  more 
glassy  coating  is  dusted  on,  which  after  a 
second  heating,  forms  the  enamel  proper. 

(2)  Purpose  of  Tests 

Purpose  of  tests  are  the  same  as  for  "  Metals 
and  Metal  Products." 

(3)  Nature  of  Tests 

(a)  Chemical  analysis. 

(b)  Determination  of  weight  per  unit  area. 

(c)  Bending  tests. 

(d)  Miscellaneous  tests  of  physical  properties, 

e.  g.,  resistance  to  the  action  of  dilute 
acids,  resistance  to  certain  heating  and 
cooling,  and  good  adhesion  to  the  metal 
and  the  conditions  of  impact. 
2.  Hydraulic  Cements  and  Concrete 
A.  Portland  Cement 
(1)  Definition: 

The  most  common  type  of  hydraulic  cement 
is  known  as  Portland  Cement,  which  may  be 
denned  as  the  product  obtained  by  finely  pul- 
verizing clinker  produced  by  calcining  to  in- 
cipient fusion  an  intimate  mixture  of  prop- 
erly proportioned  argillaceous  and  calcareous 
substances,  with  only  such  additions  subse- 
quent to  calcining  as  may  be  necessary  to  con- 
trol setting  properties.  Such  addition  should 
not  exceed  three  per  cent  of  the  calcined  prod- 
uct. Portland  Cement  is  essentially  a  mix- 
ture of  lime,  silica,  alumina,  and  iron  oxide. 
There  is  perhaps  no  structural  material  sus- 


240  APPENDIX 

ceptible  of  a  greater  variety  of  uses  than  ce- 
ment. This  is  due  to  the  fact  that  it  is  han- 
dled and  placed  as  a  plastic  material;  it  ob- 
tains great  strength  in  a  comparatively  short 
period  of  time;  it  is  of  constant  volume  and 
relatively  permanent,  and  is  almost  univer- 
sally available.  The  more  important  proper- 
ties of  cement  are  its  strength  as  a  binding 
medium  and  its  durability.  A  normal  Ameri- 
can Portland  Cement  which  meets  the  stan- 
dard specifications  for  soundness,  setting  time, 
and  tensile  strength,  has  an  approximate  com- 
position within  the  following  limits: 

Per  cent 

Silica 19  to  25 

Alumina  5  to   9 

Iron  oxide 2  to   4 

Lime    60  to  64 

Magnesia    1  to   5 

Sulphuric  anhydride 0.5  to   2 

Insoluble  residue 0.1  to   1 

The  composition  of  normal  Portland  Cement, 
has  been  the  subject  of  a  great  deal  of  in- 
vestigation, and  it  can  be  said  that  the  quan- 
tities of  silica,  alumina,  iron  oxide,  lime,  mag- 
nesia, and  sulphuric  anhydride  can  vary 
within  fairly  wide  limits  without  materially 
affecting  the  quality  of  the  material. 
(2)  Purpose  of  Tests 

The  purpose  of  tests  is  to  determine  the 
compliance  of  the  cement  to  the  specifications 
approved  by  the  American  Society  of  Testing 
Materials. 


APPENDIX  241 

(3)  Nature  of  Tests 

(a)  Chemical  Analysis. 

The  analysis  of  a  cement  will  show  the 
uniformity  in  composition  of  the  pro- 
duct from  individual  mills.  As  the  pres- 
ent standard  specifications  limit  the  sul- 
phuric anhydride  to  two  per  cent  and  the 
magnesia  to  five  per  cent,  chemical  analy- 
sis should  be  made  for  record  on  every 
sample. 

(b)  Physical  Tests 

The  physical  tests  most  frequently  made 
to  determine  the  quality,  in  the  order  of 
their  importance,  are :  soundness,  time  of 
setting,  tensile  strength,  fineness  and 
specific  gravity.  The  purpose  of  the 
soundness  test  is  to  detect  those  qualities 
in  a  cement  which  tend  to  destroy  the 
strength  and  durability.  The  determina- 
tion of  the  time  when  the  plasticity  of 
the  mixture  ceases  or  the  " initial  set77  is 
obtained  is  very  important,  for  the  sub- 
sequent disturbance  of  the  material  may 
cause  a  loss  of  strength.  A  knowledge  of 
the  time  required  for  "'final  set"  is  also 
of  importance,  especially  if  the  cement  is 
to  be  used  in  marine  construction.  The 
tensile  strength  test  is  a  direct  measure- 
ment of  the  cohesive  strength  of  the 
material  and  is  important  in  view  of  the 
fact  that  a  cement  may  meet  the  require- 
ments of  all  the  other  tests  and  yet  have 
very  little  cementing  value.  Only  the  ex- 
tremely fine  powder  of  cement  called 


242  APPENDIX 

"flour"  possesses  appreciable  cementing 
qualities  and  the  coarser  particles  are 
practically  inert,  adding  little  to  the  cem- 
enting value  for  several  weeks  or  months 
after  mixing  with  water.  No  sieve  is 
fine  enough  to  determine  the  flour  in 
cement,  nor  is  there  any  other  means  of 
accurately  and  practically  measuring  the 
flour.  Some  cements  grind  easier  than 
others ;  first,  although  a  larger  percentage 
of  one  cement  may  pass  the  200-mesh 
sieve  than  another,  the  former  may  have 
a  smaller  percentage  of  actual  flour  due 
to  the  difference  in  the  hardness  and 
the  character  of  the  clinker  and  the 
method  used  in  grinding.  The  specific 
gravity  of  a  Portland  Cement  is  not  an 
indication  of  its  cementing  value.  It 
will  vary  with  the  constituents  of  the 
cement,  especially  with  the  content  of 
iron  oxide. 
(4)  Sampling 

The  samples  of  cement  should  be  so  taken 
as  to  fairly  represent  the  material.  The  sam- 
pling is  ordinarily  left  to  the  laboratory  sel- 
ected to  make  the  chemical  and  the  physical 
tests. 
B.  White  Cement 

Most  of  the  white  cements  now  manufactured 
are  white  Portland  Cements,  as  they  are  manu- 
factured in  the  same  manner,  and  possess  prac- 
tically all  of  the  properties  of  the  Portland  Cement. 
The  light  color  is  due  to  the  absence  of  iron  in  the 


APPENDIX  243 

composition,  which  is  controlled  by  using  raw  ma- 
terials free  from  iron  in  its  manufacture.  It  is 
necessary  in  most  cases  to  use  White  Cement  if 
pigments  are  to  be  added  for  tinting,  as  the  normal 
Portland  Cement  is  gray  and  clear  colors  cannot 
be  obtained  with  it.  The  same  tests  are  applied 
to  White  Cement  as  are  applied  to  Portland 
Cement. 
C.  Sand  and  Stone  Screenings 

Natural  sand  may  be  defined  as  the  fine  particles 
of  natural  water-worn  stone  or  other  mineral 
material.  Stone  screenings  is  essentially  an  arti- 
ficial sand.  The  best  grade  of  sand  is  composed 
chiefly  of  inert  siliceous  material.  The  finer 
grades  of  plastering  and  building  sand  are  usually 
beach  or  pit  sand.  Stone  screenings  may  be  ob- 
tained from  any  kind  of  stone  and  is  the  product 
received  from  the  stone  crusher  which  passes  the 
^4-inch  mesh  sieve.  Sand  is  graded  according  to 
the  uses  for  which  it  is  intended.  For  fine  plaster 
work  the  sand  practically  all  passes  a  20  or  30- 
mesh  sieve,  for  mortar  it  all  passes  a  10-mesh 
sieve,  and  for  use  as  fine  concrete  aggregate  it  all 
passes  a  %-inch  mesh  sieve.  Stone  screenings  are 
used  primarily  in  the  construction  of  roads  and  as 
fine  concrete  aggregate.  Sand  varies  in  chemi- 
cal composition,  size  of  grain,  sharpness,  porosity, 
hardness  and  cleanliness.  Stone  screenings  will 
vary  in  chemical  composition,  shape  of  particles, 
porosity,  hardness,  strength  and  cleanliness  or 
freedom  from  dust.  A  knowledge  of  the  chemi- 
cal composition  of  sand  or  stone  screenings  to  be 
used  for  building  purposes  is  of  little  or  no  value. 


244  APPENDIX 

The  particles  of  sand  or  stone  should  be  graded 
so  as  not  to  be  of  uniform  size  to  give  maximum 
density  in  water  or  concrete.  The  hardness  of 
sand  and  stone  screenings  is  of  importance  if  the 
material  is  to  be  exposed  to  abrasion,  as  in  roads, 
concrete  floors,  walks,  etc.  An  apparently  good 
sand  is  at  times  found  to  give  very  poor  results  in 
a  mortar  or  concrete.  This  is  found  to  be  due 
in  many  cases  to  the  presence  of  loamy  clay,  or- 
ganic, or  mineral  matter,  which  coats  the  particles 
and  prevents  adhesion  of  the  binding  medium. 
The  following  tests  on  sand  and  stone  screenings 
are  ordinarily  conducted;  the  weight  per  cubic 
foot  and  percentage  of  voids ;  granulometric  analy- 
sis ;  determinations  of  the  percentage  of  silt,  which 
is  usually  the  deleterious  material;  determination 
of  tensile  and  compressive  strength  as  compared 
with  the  standard  sand ;  chemical  determination  of 
the  presence  of  organic  matter,  soluble  alkalis,  etc. 
3.  Ceramics 

A.  Clays  and  Shales 

Clays  are  mixtures  of  minerals  or  rocks  in  which 
hydrous  silicate  of  alumina  is  present  in  sufficient 
amount  to  impart  its  characteristics  to  the  mass  to 
a  reasonable  degree.  Shales  are  hardened  clays, 
possessing  a  more  or  less  well-defined  cleavage. 
The  main  properties  with  which  the  user  of  clays 
is  concerned  are:  plasticity  and  working  quality, 
bonding  power,  drying  shrinkage  and  behavior, 
burning  shrinkage,  vitrification  range,  color  and 
fusibility.  Note  must  also  be  taken  of  the  presence 
of  impurities  like  carbon,  gypsum,  pyrites,  etc. 


APPENDIX  245 

B.  Clay  Products 

Clay  Building  Brick  includes  both  common  and 
face  brick,  as  well  as  blocks  and  various  shapes 
employed  in  brick  work.  The  term  tl  Architec- 
tural terra  cotta"  covers  decorated  hollow  blocks 
of  a  fire  clay  body  and  pressed  in  plastic  molds. 
These  may  be  used  with  a  glazed  or  unglazed  sur- 
face. Clay  roofing  tiles  are  usually  manufactured 
without  a  glazed  surface,  though  increasing  use 
is  now  being  made  of  glazed  products.  Ceramic 
Floor  Tiles  are  produced  from  mixed  or  natural 
bodies  burned  to  vitrification.  Glazed  wall  tiles 
are  ceramic  tiles  covered  with  a  bright  glaze  and 
used  for  the  facing  of  walls.  Paving  Blocks  and 
Bricks  consist  of  vitrified  shale  or  fire  clay  and  are 
used  for  the  surfacing  of  streets.  Specifications 
offered  by  the  National  Paving  Brick  Manufactur- 
ers Association  should  be  followed  in  every  detail. 
Sewer  Pipe  is  usually  made  from  shale  or  fire  clay, 
rarely  from  surface  clay;  ordinary  hard-burned 
and  provided  with  salt  glaze.  In  products  of  this 
kind  no  evidence  of  excessive  lamination  or  of  an 
over  burned,  vesicular  structure  must  be  present. 
Any  pipe  showing  black  covering  should  be  re- 
jected. The  walls  of  the  pipes  should  be  straight 
and  uniformly  glazed.  No  unglazed  surface, 
cracks,  blisters  or  other  defects  must  be  observed. 
When  struck  with  a  hammer  the  pipe  must  give  a 
clear  ring.  Drain  Tiles  are  pipes  consisting  of 
burned  clay,  usually  unglazed.  They  are  usually 
made  of  red  burning  clay  or  shale.  The  tiles 
should  be  well  burned,  straight  without  cracks  and 
should  be  cut  off  square  at  the  ends.  Porcelain 


246  APPENDIX 

and  White  Ware  are  ceramic  products  manufac- 
tured from  white  burning  mixtures  of  kaolin,  ball 
clay,  feldspar  and  flint ;  when  burned  to  the  state 
of  translucent  vitrification,  may  be  called  porce- 
lain. Similar  mixtures  not  carried  to  complete 
vitrification  are  known  as  white  ware  or  earthen 
ware  bodies.  A  great  variety  of  products  may  be 
included  under  this  heading,  of  which  three  groups 
are  especially  prominent:  white  pottery,  known 
as  porcelain,  china,  semiporcelain,  white  ware,  etc., 
white  sanitary  ware,  and  electrical  porcelain. 
Fireproofing  for  steel  protection  is  ordinarily  a 
clay  fireproofing  consisting  of  porous  tiles  shaped 
to  adapt  themselves  to  steel  girders,  beams  and 
columns.  The  term  "refractories"  covers  all  the 
materials  used  to  resist  high  temperatures. 
4.  Lime 

A.  Burned  Lime 

Lime  consists  essentially  of  calcium  oxide  or  of 
calcium  and  magnesium  oxides.  It  may  be  de- 
fined as  the  product  obtained  when  limestone, 
marble,  dolomite,  or  similar  calcareous  material 
is  calcined  at  a  temperature  below  the  sintering 
point,  provided  that  such  product  will  slake  when 
treated  with  water.  The  important  properties  of 
lime  are:  sand-carrying  capacity,  good  crushing 
and  good  tensile  strength  of  1:3  mortar  when 
ninety  days  old.  The  lime  should  be  well  burned, 
of  good  color,  plastic,  and  free  from  material 
which  will  not  slake. 

B.  Hydrated  Lime 

Hydrated  Lime  is  a  dry,  flocculent  powder  which 
is  prepared  by  slaking  lime  with  an  amount  of 


APPENDIX  247 

water  insufficient  to  form  a  paste,  but  enough 
to  combine  with  the  calcium  oxide  present.  Hy- 
drated  lime  should  have  the  same  properties  as 
the  lump  lime  in  place  of  which  it  is  to  be  used. 
In  addition  it  should  contain  no  free  calcium  oxide, 
and,  when  used  for  certain  purposes  the  fineness 
of  the  material  is  important. 
C.  Sand-Lime  Brick 

Sand-Lime  Brick  consists  essentially  of  sand 
which  is  bound  together  by  hydrated  calcium  sili- 
cate formed  by  the  action  of  lime  on  sand  under  the 
influence  of  steam.  The  distinguishing  property  of 
sand-lime  brick  is  its  color,  which  should  normally 
be  nearly  white,  and  should  be  readily  susceptible 
of  change  by  the  addition  of  various  pigments.  It 
should  be  comparable  with  common  clay  brick  in 
regard  to  crushing  and  transverse  strengths.  The 
quantity  of  water  it  can  absorb  is  important,  and 
also  the  crushing  strength  when  it  is  wet. 

5.  Stone 

Structural  or  building  stones  are  of  several  types 
and  of  considerable  variety.  Since  stones  are  usually 
called  upon  to  withstand  great  pressures  and  are  ex- 
posed to  the  elements,  the  important  physical  points 
to  be  considered  by  the  buyer  are  strength  and  resist- 
ance to  weathering.  Stones  of  the  same  class  vary 
greatly  in  texture  and  color,  so  that  the  selection  of 
the  stones  should  depend  upon  the  service  exacted. 

6.  Paint  Materials 

This  class  includes  dry  pigments,  pigments  ground 
in  oil  and  in  japan,  ready-mixed  paints,  water  colors, 
tinting  colors,  enamels,  stains,  paint  oils,  volatile 
thinners,  driers,  oil  and  spirit  varnishes,  etc.  Paints 


248  APPENDIX 

and  varnishes  are  the  finished  products;  the  others 
are  paint  materials  used  to  produce  the  finished  pro- 
duct; pigments  should  be  finely  ground,  they  should 
furnish  a  permanent,  opaque  surface  of  the  shade  or 
hue  desired;  they  should  not  chalk,  check  or  crack, 
nor  discolor  when  exposed  to  normal  conditions  of 
exposure,  and  should  have  no  corroding  action  on  the 
surfaces  protected,  and  the  dry  paint  film  should  be  as 
impervious  as  possible  to  moisture,  air,  and  gases. 
Many  single  pigments  do  not  have  all  these  requisite 
characteristics;  some  have  high  tinting  power  but 
lack  in  opacity  or  optical  covering  power ;  others  have 
a  tendency  to  chalk  or  peel  when  used  alone;  others 
have  such  strong  coloring  strength  that  they  can  be 
blended  with  cheaper  pigments  without  any  sacrifice 
of  quality.  Purity  is  not  necessarily  synonymous 
with  quality.  On  these  accounts  the  best  results  are 
frequently  obtained  by  proper  blending  of  pigments. 
Linseed  oil  is  the  chief  drying  oil.  It  absorbs  oxygen 
from  the  air  and  changes  it  from  a  liquid  to  a  solid, 
leatherlike  substance  which  holds  the  pigments  to  the 
surface.  Other  oils,  such  as  tung  oil  (Chinese  wood 
oil),  soya-bean  oil,  fish  oil,  etc.,  have  this  property  of 
absorbing  oxygen  to  a  greater  or  lesser  degree  and 
may  furnish  a  satisfactory  substitute  for  linseed  oils. 
By  heating  these  oils  with  metallic  salts,  especially 
compounds  of  lead  and  manganese,  boiled  oils  are  pro- 
duced, the  drying  action  of  which  is  considerably  in- 
creased. 

Driers  are  usually  compounds  of  lead  or  manganese 
and  linseed  oil,  rosin,  or  other  gum  resins. 

Volatile  thinners  are  usually  turpentine  or  a  vola- 
tile petroleum  product.  Turpentine  obtained  from 


APPENDIX  249 

the  sap  is  called  "gum  spirits,"  while  the  turpentine 
obtained  from  the  wood  or  stumps  is  called  "wood" 
or  "stump"  turpentine.  The  petroleum  products 
should  be  completely  volatile  at  ordinary  temperatures, 
but  they  should  not  volatilize  so  rapidly  as  to  prevent 
a  proper  flowing  out  of  the  brush  marks. 

Varnishes  are  sold  under  a  great  variety  of  names 
offered  for  a  variety  of  uses.  These  differ  in  many 
cases  only  in  name.  For  general  use,  interior,  ex- 
terior, rubbing,  and  floor  varnishes,  will  meet  the 
usual  demands  of  service. 

7.  Inks 

The  only  inks  which  can  be  relied  upon  as  suffici- 
ently permanent  for  records  are  those  containing 
finely  divided  carbon  (India  ink)  and  those  in  which 
iron  gallotannate  is  the  chief  coloring  matter.  To  the 
iron  gallotannate  an  organic  dye  is  added  because  the 
fresh  writing  would  otherwise  be  too  pale.  Some 
writing  inks  and  most  of  the  ink  powders  are  made 
solely  of  dyes.  The  nigrosine  dyes  make  ink  of  quite 
satisfactory  intensity  of  color,  but  should  never  be 
relied  upon  for  permanent  records.  Colored  inks  are 
generally  made  by  disolving  the  so-called  aniline  dyes, 
either  in  pure  water  or  with  various  additions.  Most 
of  these  are  readily  destroyed  by  sunlight,  water, 
and  various  chemical  reagents,  and  they  should  not 
be  used  for  permanent  records.  The  formation  of 
sediment  or  the  growth  of  mould  when  the  ink  is 
kept  in  an  open  vessel  for  a  week  in  a  place  free 
from  dust,  indicates  a  poor  quality  of  ink. 

8.  Paper 

In  order  that  the  user  may  more  correctly  judge 
the  quality  of  paper  and  determine  its  usefulness  for 


250  APPENDIX 

the  purpose  intended,  he  should  be  informed  by  the 
seller  upon  the  following  points:  the  fiber  composi- 
tion, tensile  strength,  folding  endurance,  thickness, 
weight  per  standard  ream,  and  per  cent  filler  re- 
tained in  the  paper. 
9.  Textiles 

Textile  material  includes  all  spun  or  woven  fabrics 
or  fibers  suitable  for  spinning  or  weaving.  Textile 
fibers  have  a  wide  range  of  uses.  Among  the  prop- 
erties which  the  fibers  should  possess  are:  fineness, 
length,  strength,  and  flexibility.  Yarns  should  have 
good  weaving  and  dyeing  qualities ;  minimum  slipping 
in  the  fabric  and  high  luster  are  often  desirable. 
Fabrics  should  be  well  woven  and  finished  with 
even  and  straight  selvages,  a  minimum  of  spots 
and  blemishes,  and  uniformity  as  to  color  and 
strength. 
10.  Rubber 

Crude  rubber  is  obtained  by  coagulating  and  drying 
the  milky  latex  derived  from  certain  trees  and  plants. 
The  quality  of  the  crude  rubber  which  determines 
its  market  value  depends  not  merely  upon  the 
species  of  plant  from  which  the  latex  has  been  secured 
but  also  upon  the  locality  in  which  it  is  grown,  and 
in  a  great  measure  upon  the  methods  followed  in 
its  correction,  coagulation,  and  drying.  The  best 
rubber  comes  from  the  Amazon  basin.  The  term 
11  rubber/*  as  commonly  employed,  does  not  refer  to 
the  commercially  pure  gum,  but  to  a  vulcanized  com- 
pound which  consists  of  gum,  mineral  matter  or  pig- 
ments, and  sulphur.  Mineral  matter  (filler)  serves 
a  very  useful  purpose  in  adding  desirable  properties 


APPENDIX  251 

which  could  not  otherwise  be  obtained.  Their  pres- 
ence, therefore,  should  not  be  looked  upon  as  adul- 
teration. The  real  value  of  rubber  in  any  case  de- 
pends upon  the  length  of  time  that  it  will  retain 
those  properties  which  are  desirable. 


INDEX 


Acceptance,    communication 

of,  123 

Acknowledgment,  212,  214 
Action,  of  eyebrows,  47 

—  personal  analysis  of,  46 
Advantages  of  a  regular  re- 
ceiving department,  171 

Advertising,  policy  as  key- 
note, 30 

Agitation  and  laws  against 
bribery,  142 

Aims,  plans  and  policies,  2 

—  plans  and  resources,  im- 

portance  of  knowledge 
of,  13 

Analysis,  of  purchasing  or- 
ganization, 154 

—  of  purchasing  recommend- 

ations, necessity  for,  8, 

—  of  requisitions  8, 

—  of  salesmen,  49 

—  of  self  from  selling  point 

of  view,  44 

—  of  speech,  personal,  45 

—  power  of,  8 
Appearance  indicators,  45 

—  chin  and  lips,  44 

—  eyes,  44 

—  forehead,  44 
Appearances,  personal  analy- 
sis of  physical,  44 

Approval  of  invoices,  80 
Assistant,  duties  of,  160 

—  takes  charge  of  purchasing 

department  in  absence 


Assistant  (cont.) 

of  purchasing  executive, 

125 
Assuring       standardization 

throughout  the  plant,  192 

Basic  principles  underlying 

price  variations,  6 
Bearing    of    sales    policies 

upon  purchasing,  31 
Beginning     standardization 

with     catalogues     and 

forms,  189 
Bids,  blank,  207 

—  securing  in   advance   of, 

need,  3,  206 
Blanket  orders,  97 
Blanks,        acknowledgment, 

214 

—  appearing  on  reverse  of 

purchase  order,  225 

—  National  Association  Stan- 

dard   Purchase    Order 
form,  211 

—  pattern    shipping    order, 

216 

—  purchase  order,  208 

—  purchase  record  card,  218 

—  quotation,  207  , 

—  receiving  Record,  222 

—  requisition,  202 
Breach  of  contract,  compen- 
sation, 132 

—  damages  resulting  from, 

131 


253 


254 


INDEX 


Bribery,  agitation  and  laws 
against,  142 

—  commercial,  144 
Building  up  a  sales  defense, 

54 
Business  cycles  and  planning 

ahead,  102 
Buying  instinct,  5 

Cancellations,  130 

Changes  in  quantity  or  kind 
of  goods  to  be  bought, 
103 

Charge  back  invoice,  228 

Charting  the  purchasing  or- 
ganization, 157 

Charts  for  fixating  of  re- 
sponsibilities, 156 

Checking  invoices,  223 

Checking  up  established 
policies,  27 

Chief  clerk,  duties  of,  161 

Chin,  44 

Christmas  gifts,  145 

Conditions  should  appear  on 
face  of  purchase  order, 
210 

Commercial  bribery  defined, 
144 

Common  sense,  10 

Communication  of  accept- 
ance of -contract,  123 

Compensation  for  breach  of 
contract,  132 

Competition  versus  corrup- 
tion, 141 

Composite  monthly  and 
yearly  changes,  117 

Contract  Laws,  120 

—  classes    of    contracts    re- 

quired  to  be   attested, 
125 


Contract  Laws  (cont.) 

—  communication  of  accept- 

ance, 123 

—  competence,  124 

—  meeting  of  minds,  122 

—  the  consideration,  121 

—  validity  of  oral  contracts, 

125 

Contracts,  essential  require- 
ments in  forming,  119 

—  in    general    are    equally 

valid,  whether  oral  or 
written,  125 

Correct  conception  of  pur- 
chasing organization,  149 

Cooperation  with  accounting 
department  may  hold 
good-will  of  seller,  35 

Coordination,  between  ac- 
counting and  purchas- 
ing departments,  2,  79 

—  between  engineering  and 

purchasing  department, 
75 

—  of  all  business  functions, 

2 

—  of  departments,  reason  for 

demanding,  70 

Cost  department,  relation  to 
purchasing  department, 
229 

Cost  record  should  be  kept 
separate  from  other  re- 
cords, 89 

Counting  and  checking  goods 
received,  171 

Credit,  definition,  17 

Damages,  131 

—  resulting  from  breach  of 

contract,  131 

Data  necessary  for  success- 
ful purchasing,  92 


INDEX 


255 


Defining  the  stores  depart- 
ment, 164 

Deflation,  effects  on  pur- 
chasing, 100 

Delivery  of  patterns  to  a 
foundry,  228 

—  filing,  229 

—  form,  216 

Desirable  impression  to  leave 
with  departing  sales- 
man, 58 

Detailed  information  that 
must  come  to  the  pur- 
chasing executive,  74 

Difference  between,  credit 
and  financial  resources, 
17 

—  policy  and  principle,  28 

—  reliable   and   dependable 

source  of  supply,  20 
Different    methods,    of    ac- 
knowledging orders,  212 

—  of    buying    that    require 

different  types  of  organ- 
izations, 153 

Direct  action,  11 

Do  standards  interfere  with 
progress,  193 

Duties  of  assistant,  160 

—  chief  clerk,  161 

—  purchasing  executive,  158 

Economic  management  of 
materials,  174 

Effective  way  of  applying 
pressure  when  ship- 
ments are  delayed,  89 

Effect  of,  "business  cycle" 
on  business,  prices  and 
profits,  102 

—  foreign    and    speculative 
.    buyers,  104 


Effect  of  (cont.) 

—  specialized   buyers   upon 

sales  methods,  139 

—  standardization  upon,  re- 

quisitors,  194 

—  storekeeping,  198 

—  surroundings  on  salesman, 

48 

—  the  seller,  195 

—  wrong  purchasing,  72 
Effects  of  deflation  on  pur- 
chasing, 100 

Efficiency  experts,  150 
Elimination  of,  indirect  loss, 
173 

—  lost  motion,  56 
Emergency  orders,  205 
Essential    requirements    in 

forming  a  contract,  119 
Essentials  of  plant  and  ma- 
terial inventory,  177 
Establishing  standards,  193 
Excessive  stock  means,  172 
Eyes,  44 
Eyebrows,  action  of,  47 

Failure  to  perform  agree- 
ment, 126 

Far-reaching  effect  of  faulty 
stores  system,  167 

Federal  Trade  Commission, 
137, 138, 140, 142, 144 

Filing,  of  requisitions,  205 

—  the  record  card,  220 
Financial  standing  import- 
ant factor  in  successful 
purchase    management, 
16 

First  requirement  of  the  pur- 
chasing executive,  119 
Follow-up  department,  213 
Follow-up  system,  215 


256 


INDEX 


Forecast  study  in  purchas- 
ing, the  proven  need  of, 
99 

Forehead,  as  appearance  in- 
dicator, 44 

Foresight,  5 

Forms,  origin  of,  201,  202 

Formula  for  making  fore- 
cast, 106 

Four  copies  of  purchase 
order,  210 

Fraud,  129 

Function  of  ethics  in  busi- 
ness, 133 

Fundamental  factor  on  busi- 
ness forecast,  106 

General  policies,  analysis  of, 
32 

—  importance  of,  27 
Goods   returned   for  credit, 

227 

Goodwill,  held  by  coopera- 
tion with  accounting  de- 
partment, 55 

—  importance  of,  34 
Gradual  change  in  attitude 

between  seller  and  buy- 
er, 41 

Grafting  an  international 
question,  142 

Graphic  chart  for  business 
forecast,  discussion,  107- 
117 

—  charts,  108,  112 
Guarding   against   unneces- 
sary purchasing,  94 

How  to  locate  source  of  sup- 
ply, 21 

Ideal  office  surroundings,  48 


Ideal  salesman,  from  pur- 
chasing executive  's  point 
of  view,  153 

—  from  the  salesmanager 's 

point  of  view,  52 
Indirect  loss,  elimination  of, 
173 

—  sources  of,  171 
Inquiry  through  allied  lines, 

method  of  locating 
source  of  supply,  22 

Instinct,  buying,  5 

Interdependence  of  purchas- 
ing upon  other  depart- 
ments, 73 

Interrelation,  between  ac- 
counting and  purchas- 
ing departments,  79 

—  of  sales  to  purchasing  de- 

partment, 78 

Inventory,  essentials  of  plant 
and  material,  177 

—  importance  of,  176 

—  purchasing  executive 's  re- 

lation to,  182 

—  stores  department  relation 

to,  183 
Invoices,  approval  of,  80 

—  charge  back,  226 

—  checking,  223 

—  standard,  190 
Importance  of,  general  poli- 
cies, 27 

—  goodwill,  34 

—  knowing   the  technic    of 

sales  approach  and  pros- 
pect analysis,  43 

—  knowledge  of  aims,  plans 

and  resources,  13 

—  misrepresentation      when 

purchasing         goods 
through  samples,  129 
-  receiving  department,  170 


INDEX 


257 


Importance  of  (cont.) 

• —  right  relationship  between 

buyer  and  seller,  36 
Items,  for  consideration  in 

purchase,  of  machinery, 

85 

—  of  roofing,  86 

—  necessary     upon     record 

card,  218 

Kind  of  organization  de- 
pends on  kind  of  busi- 
ness, 152 

Knowledge,  of  price,  89 

—  of  values,  90 

Lack  of,  a  standard  of  out- 
put, 172 

—  coordination  between  ex- 

ecutives the  cause  of  low- 
ered standards,  82 

—  standardization   in   large 

corporations,  188 
Law  of  contracts,  120 
Legal  requirement  to  read 

contract  before  signing, 

119 

Lips,  44 
Lost  motion,  elimination  of, 

56 

—  relation  to  direct  action, 

12 

Manner  of  approach,  51 

Manufacturing  process  in  re- 
lation to  fine  element,  88 

Manufacturing  processes  of 
materials  purchased,  87 

Material  inventory,  perpet- 
ual and  physical,  178 

Materials  chargeable  to 
stores  department  in 
inventory,  184 


Matters  for  the  personal  at- 
tention of  the  purchas- 
ing executive,  158 

Maximum  stock  level,  181 

Meeting  of  minds,  122 

Mental  alertness,  6 

Method  of,  making  claims, 
225 

—  strengthening          ' '  price 

memory, "  89 

Minimum  stock  level,  181 

Misdescription  of  property 
on  sale,  129 

Mismanagement  of  mate- 
rials, 172 

Misrepresentation,  129 

Misuse  of  word  "  Standard- 
ization "  in  price  bait- 
ing, 197 

Moral  and  material  aspects 
of  bribery,  143 

Moral  standing,  17,  18 

National  standard  catalogue, 

189 

Natural  aptitude,  4 
Necessity  for,  physical  count 

in  inventory,  178,  183 

—  standard  quantity  of  out- 

put, 173 
— technical    comparison    of 

competitive  articles,  85 
Need    for,  a  knowledge    of 

contract  laws,  118 

—  laws    to    enforce    ethical 

methods,  137 

—  purchasing  agents'  asso- 

ciations, 24 
New    England    purchasing 

agent's  association,  201 
New  method  of  selling  and 

buying,  38 
Normal  stock  level,  181 


258 


INDEX 


No  system  can  run  itself,  201 

Old  English  Statue  of 
Frauds,  126 

Old  method  of  selling  and 
buying,  36 

One  firm's  policy  may  be  an- 
other firm's  principle, 
29 

Organization,  purchasing  ex- 
ecutive 's  policy  toward 
his,  33 

Organizations,  different 
methods  of  buying  that 
require  different  types 
of,  153 

Origin  of  forms  and  discus- 
sion thereof,  201 

Past  practices  against  the 
purchasing  executive, 
138 

Perpetual  inventory,  as  a 
basis  from  which  to  cal- 
culate requirements,  180 

—  purpose  of,  179 

—  requires  perpetual  atten- 

tion, 178 
Personal  analysis  of,  actions, 

46 
- — physical  appearances,  44 

—  speech,  45 

—  surroundings,  47 
Personal     qualifications     of 

the  storekeeper,  168 

Personal  qualities  essential 
in  purchasing,  3 

Physical  appearances,  per- 
sonal analysis  of,  44 

Physical  properties,  rate  of 
depreciation  of,  177 

Points  to  consider  in  install- 
ing a  system,  151 


Policies,  and  principles  of 
the  seller,  23,  26 

—  difficult  to  learn,  24 

—  known    as    "  trade    cus- 

toms, "  29 

Policy,  as  a  keynote  in  ad- 
vertising, 30 

—  defined,  28 
Power  of  analysis,  8 
Precise  agreement,  122 
Price  guarantee,  a  form  of 

rebate,  29 
Price    versus    performance, 

91 
Principle,  defined,  28 

—  of       analysis       through 

speech,  46  , 

Principles,  basic,  6 

Proposed  use  of  the  pur- 
chase, 85 

Purchaser's  liability  begins 
upon  acceptance  of 
goods  by  carrier  and 
rendering  of  bill  of  lad- 
ing, 127 

Purchases  made  without  re- 
quisition, 204 

Purchasing  agent,  in  posi- 
tion of  aggressor,  49 

Purchasing  Agents'  Associ- 
ation, need  for,  24 

Purchasing  Agent's  Fore- 
cast, The,  105 

Purchasing  as  an  indispen- 
sible  cog  of  business 
management,  15 

Purchasing  ethics  and  pur- 
chasing policies,  136 

Purchasing  executive,  as  a 
balance  to  the  engineer, 
191 

—  duty  to  his  profession,  146 

—  not  an  order  clerk,  3,  15 


INDEX 


259 


Purchasing  executive  (cont.) 

—  policy  toward  his  organ- 

ization, 33 

—  relation  to  inventory,  182 
Purchasing        organization, 

charting  the,  157 

—  correct  conception  of,  149 
Purpose  of,  perpetual  inven- 
tory, 179 

—  system,  150 

Qualifications  of  an  ideal 
purchasing  system,  200 

Quantity  purchases  under 
blanket  orders,  97 

Quotations,  206 

—  blank,  207 

Rate  of  depreciation  of 
physical  properties,  177 

Eeasons  for,  comprehensive 
record  of  stores,  165 

—  demanding     coordination 

of  departments,  70 

—  different   kinds    of   pur- 

chasing    organizations, 
151 

—  former   ill   will   between 

seller  and  buyer,  39 
Receiving  department,  170 
Receiving  form  appearing  on 
reverse  side  of  purchase 
order,  225 

Receiving  record,  221,  222 
Relation  between  manufac- 
turing and  purchasing 
departments,  76 
Relief  from  contracts,  126 
Relation  of,  cost  department 
to    purchasing    depart- 
ment, 229 

—  purchasing  to  economy  of 

manufacture,  81 
Requisition,  blank,  202 


Requisitions,  an  aid  to  stand- 
ardization, 166 

—  analysis  of,  8 
Requisitors,  effect  of  stand- 
ardization upon,  194 

Resources,  definition  of,  17 

—  tangible  asset,  17 
Responsibility  of  purchasing 

toward    other     depart- 
ments, 71 

Result  of,  faulty  stores  sys- 
tem, 167 

—  shortage  of  materials  and 

supplies,  172 
Right   relationship   between 

buyer  and  seller,  36 
Rules  for  ethical  guidance  of 

purchasing    executives, 

147 

Sales  defense,  building  up, 

56 
Salesman    looked    upon    as 

consulting  and  source  of 

information,  39 
Salesman's  analysis  of  buy- 
er, 42 
Salesman's  attitude  toward 

defeat,  49 
Sales  policies,  bearing  upon 

purchasing,  31 
Samples  should  be  subject  to 

analysis,  129 

—  blank,  207 

Selecting  the  best  method  of 
managing  materials,  165 
Self-reliance,  9 
Service,  a  moot  question,  62 

—  according  to  the  United 

States  Bureau  of  Stand- 
ards, 63 

—  as  it  appears  to  modern 

salesmanager,  64 


260 


INDEX 


Service  (cont.) 

—  purchasing       executive's 

idea  of,  65 
Securing  bids  in  advance  of 

need,  3,  206 
Shortage,  of  materials  and 

supplies,  result  of,  172 

—  referred     to     traffic     or 

claim  department,  224 

Should  there  be  specified 
calling  hours,  59 

Signal  system  for  facility  in 

,     follow-up,  215 

Sizing  up  the  purchasing 
executive,  42 

Source  of  supply,  difference 
between  reliable  and  de- 
pendable, 20 

—  how  to  locate,  21 

—  one  essential  around  which 

science    of    purchasing 
revolves,  13 

Sources  of  indirect  loss,  171 
Speech,  personal  analysis  of, 

45 
Stacking  goods  for  physical 

count,  185 
Staff  specialists,  93 
Standard  invoice,  190 
Standard,  necessary  for  op- 
eration of  any  business, 
188 

—  of  output,  lack  of,  172 
Standardization     of     vital 

necessity  to  large  cor- 
poration, 189 

Standards,  of  performance, 
64 

—  of  practice,  64 

—  of  quality,  63 

—  reduce  cost  and  amount 

of  stock,  198 


Standing  of  probable  source 
of  supply,  23 

—  obtained  through  Dun 's, 

Bradstreet's      and 
Moody 's,  23 
Stock  levels,  180 

—  maximum,  181 

—  minimum,  181 

—  normal,  181 
Storekeeper,  an  aid  to  stand- 
ardization, 198 

Stores,  department  relation 
to  inventory,  183 

—  of  vital  importance  to  pur- 

chasing department,  77 
Study  of  salesmanagement 
and  salesmanship  of 
value  to  purchasing  ex- 
ecutive, 44 

Studying  buying  needs,  4 
Successful    purchasing    de- 
pends upon  accuracy  of 
data,  74 

Summary  of  meaning  of  ser- 
vice as  it  appears  to  pur- 
chasing executive,  68 
Supervision  of  stores,  166 
System,  purpose  of,  150 

Tact,  8 

Technic    of  sales    approach 

and   prospect    analysis, 

43 

Temperament,  buying,  3 
The  business  card,  49 
The  compromise,  60 
The  consideration,  121 

—  defined,  121 
The  handclasp,  50 

The  necessity  for  a  coterie 
of  selling  firms,  19 


INDEX 


261 


The  proven  need  of  forecast 
study  in  purchasing,  99 

The  purchase  director  should 
know  all  policies  of  his 
firm,  31 

The  purchase  order,  208 

—  national  standard,  211 
The    purchasing    executive, 

object  of  highly  concen- 
trated effort,  43 
The  purchasing  executives, 
analysis  of  the  salesman, 
49 

—  idea  of  service,  65 
The  record  card,  217 
The  requisition,  202 

The  salesman's  side  of  call- 
ing hours,  60 

The  war  as  a  stimulation  to 
standardization,  198 

Three  essentials,  quality,  ser- 
vice, and  price,  65 

Time,  important  factor  in 
modern  buying,  12 

Trade  boycotts,  139 

''Trade  evils,' '138 

Two  methods  of  transmitting 
cost  of  articles  to  ac- 
countant, 229,  230 

Types  of  salesmen,  51 

Uniformity  of  quality  linked 
with  uniformity  of 
primary  materials,  83 

United  States  Patent  Offi- 
cial's ruling  on  Service, 
62 

United  States  Bureau  of 
standards,  interpreta- 
tion of  service,  63 

Usefulness  of  ethical  stand- 
ards in  business,  135 


Validity  of,  contract  often 
conditional  upon  goods 
being  exactly  like  sam- 
ple, 130 

—  oral  contracts,  125 
Value  of  a  definite  principle, 

behind  an  organization, 
155 

in  fixation  of  responsi- 
bility, 156 

—  charts  for  the  fixing  of  re- 

sponsibilities, 156 

—  firm  policies,  27 

—  salesman  as  bureau  of  in- 

formation, 58 

Vender's  file  copy  of  quota- 
tion, 207 

Vital  necessity,  for  detailed 
knowledge  of  require- 
ments, 84 

—  for  standardization,  187 

—  of    properly    controlling 

materials  and  supplies, 
163 

Vital  need  of  definite  or- 
ganization policies,  26 

What  the  purchasing  execu- 
tive expects  when  he 
buys  service,  67 

What  the  twelve  factors  of 
the  dial  represent,  109- 
116 

What  the  United  States  pat 
ent  officials  rule,  62 

Why  the  purchasing  execu- 
tive is  concerned  with 
standardization,  185 

Wrong  purchasing,  effect  of, 

72 

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